The granting of a two-year extension to the Reserve Bank of India (RBI) governor D. Subbarao is a credible move on the part of the Union government. To that extent, it is a welcome step.
That, however, appears to be an exception: The behaviour of ministers and the assorted government officials towards other important institutions has been, to put it mildly, deplorable. The Comptroller and Auditor General (CAG) of India—a constitutional functionary—has been criticized by politicians and ministers alike. The goings on at the Securities and Exchange Board of India, where investigations have been ordered against upright officials—“routine”, of course—are a reason for worry.
The reason why any country needs independent institutions is to ensure that citizens—ministers and powerful politicians alike—are subject to the same set of rules as everyone. In India, all governments—there are no exceptions—have tried, at one time or another, to whittle down the independence of institutions. To that extent, all parties are guilty to an extent.
But what is happening with the present government is something else. Two distinct processes are at work here. For one, no government in recent memory has had to face a raft of corruption allegations as this one. The CAG’s reports—on spectrum pricing and now the Commonwealth Games—have detailed malfeasance on the part of ministers and officials. These have not only come in handy for the opposition to beat the government with, but have also fed into a crisis of legitimacy.
At another plane, the United Progressive Alliance (UPA) government has tried to “claw back” some space that has been ceded to independent regulators over a period of time. This is not the handiwork of some specific minister or party functionary, but is a problem of how this government visualizes its role and relationship with society at large as also its efforts to alter the balance between the market and the state.
When these two trends are seen together, the attack on institutions becomes intelligible. The more it tries to change things, the greater the scope for friction between citizens, government and institutions. The results cannot be happy.
A final word is required on the Subbarao extension. There is no exception, so to speak. India, today, is not the India of the 1970s—even if the UPA wants to imagine it that way. It is simply too well integrated into the global economy for it not to be hit if it tries to curb the independence of the central bank. That, and not some abstract respect for rules, explains the exception in Subbarao’s case.
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