The board of the RBI led by Governor Urjit Patel will meet today
India will send a "bad signal" to the global markets if the chief of the central bank, Urjit Patel, resigned over alleged attempts by the government to change rules for tighter control of the RBI, said Congress leader Veerappa Moily, who is also the chairman of the parliamentary standing committee on finance.
The allegations of perceived government interference in the Reserve Bank of India's functioning are likely to be discussed at the central bank's board meeting today.
"If (Urjit) Patel decides to resign over its (RBI) differences with the central government, it will be very sad and bad for the Indian economy. It will also send a bad signal to global markets just as (former RBI governor) Raghuram Rajan's exit did," Mr Moily told news agency Press Trust of India.
He said the entire world economy takes cues from central banks and the markets would be affected at the first sign of turbulence in the central bank of a major emerging market as India.
It would be a "very bad idea" if the government presses ahead with plans to set up a panel to oversee how the RBI makes policies. "Having a managing committee over the regulator is a very bad idea and is unknown in world economy... No country practises it," the Congress leader said.
"The RBI cannot be managed as a government department. It is an independent autonomous organisation which has been created by an act of Parliament," he said.
Mr Moily credited the UPA government led by former prime minister Dr Manmohan Singh for keeping the fundamentals of India's economy strong. "When Arun Jaitley presented the first budget of the NDA, the economic survey report said the fundamentals of the economy were strong, that means it is a compliment to the Congress regime," Mr Moily said.
"If the economic survey is presented today, can they (NDA) say with confidence that the fundamentals of economy are strong? The answer is no... This only implies that the four-and-a-half years of NDA rule has destroyed and eroded the fundamentals of the country's economy. That is the big tragedy of the present government at the centre," Mr Moily said.
The government has maintained that it does not want to plough into the reserves of the central bank. The point of friction, however, is on how much reserves should the RBI maintain.
With inputs from PTI