View: From RBI to judiciary, India's fate hinges on autonomy

By Milind Deora

In 2016, a major protest by Indian Revenue Service officers flared up against then-revenue secretary Hasmukh Adhia. While it didn’t make headlines like the crises currently unfolding at CBI and RBI, it was, in a sense, a precursor of things to come. Beginning with this incident, a pattern would be revealed in which the first majority government in 30 years would be accused of employing political manoeuvres to intimidate institutions that are, to uphold democratic ideals, designed to function independently.

In early 2018, the four senior-most judges of the Supreme Court did something utterly unprecedented: a public ‘revolt’ questioning the leadership of then-Chief Justice of India Dipak Misra, particularly with regard to abuse of power in the allocation of politically sensitive cases. The judges’ larger concern was a compromised justice delivery system and, by consequence, a compromised democracy.


But even a crisis as devastating as this was soon buried and forgotten thanks to a partisan media.

But when the CBI crisis erupted, even friendly media platforms couldn’t resist the lure of capitalising on the highprofile drama, and have been reporting on it extensively. It may not have been as constitutionally devastating as the judicial crisis. But it was definitely more sensational and political.

The other political crisis is the ongoing RBI-GoI tussle. This is not to say that the relationship between RBI and two successive UPA governments wasn’t fraught with disagreements. During the UPA years, there was constant debate around what assumes paramount importance — growth or inflation — with GoI wanting to lower interest rates to boost growth, and RBI holding firm on its conservative stance to control inflation.

However, demonetisation in 2016 truly undermined and jeopardised RBI’s autonomy. This proved to be sensationally disruptive for RBI-GoI relations. Not only was RBI’s advice ignored, it was also informed pretty much the same time as the country, and had to then scramble for months to do damage control. Demonetisation is now unequivocally accepted as a failure. One of the reasons it failed was because RBI’s warning that the move was dangerous for India went unheeded. RBI knows better than anyone — it’s the institution’s very job to know — how a decision like this would be implemented, and what its short- and long-term impacts are likely to be. And the fact that GoI still unilaterally decided to implement such an invasive monetary policy decision seriously undermined RBI’s credibility as an autonomous institution. GoI is currently trying to invoke Section 7 of the RBI Act, hitherto unused in the 83-year history of the bank, which permits GoI to give directions to RBI if it considers them necessary for ‘public interest’.

The larger point here is that the structure, functioning and architecture of institutions like the Central Board of Direct Taxes (CBDT), RBI, CBI and the judiciary are fundamentally different from those of democratically elected governments. They are designed to be autonomous and devoid of political influence. As RBI deputy governor Viral Acharya succinctly said last month, the horizon of decision-making for a government is short, like a T20 match, whereas a central bank plays a Test.

Governments are run by parties and politicians who are judged every election cycle. So, they must deliver results within a prescribed time frame —or at least project an appearance of attempting to deliver on their promises. The benefits of lowering interest rates, for instance, may not manifest quickly, but the appearance of encouraging growth in itself can improve market sentiment. The aforementioned institutions do not work on sentiment — they function on hard, objective facts. The judiciary and investigative agencies like CBI are mandated to function purely on evidence. If preliminary enquiries reveal little or no prima facie evidence, the case is usually not allowed to proceed. RBI is judged purely on sound economic policy, and functions on economic and market fundamentals.

Some institutions are more susceptible to political influence than others. But, ultimately, they’re all meant to function as unequivocally independent entities. T20 strategies shouldn’t be employed in Test matches.

Not only should this ideal of independence be respected in theory, it must also be strengthened in practice. As a country, we should be debating the ways in which we can nurture and increase the autonomy of RBI and the judiciary, or how we can liberate CBI or CBDT from political intervention. Instead, we’re currently doing quite the opposite. We’re weakening these institutions by trying to undermine and curtail their independence. Though autonomous on paper, these institutions have a long way to go in truly functioning independently and impersonally.

In the long run, autonomy is essential to preserve the democratic health of our country. Judicial autonomy allows checks and balances on the executive and legislature, thereby upholding and strengthening our Constitution. RBI is indispensable in keeping the finances of GoI and the country under scrutiny.

The harsh truth is that politicians will always be swayed by power and tempted by the prospect of control. It is, therefore, imperative for people within institutions and regulatory agencies meant to be independent to fight for their space and speak out against any attempts at political manipulation or interference. And regardless of which party’s in power, these attempts must be welcomed and actively encouraged. Autonomy, or the lack thereof, can truly augment or destroy India’s institutional capacity.

The writer is former minister of state for communications and information technology, Govt of India.