Contrary to the expectations from India Inc, RBI has left interest rates unchanged during the monetary policy review. With such kind of bold step, it is now clear that the Reserve Bank of India (RBI) will not be bogged down by pressure imposed from the government and it will take independent steps which are required for the economy.  RBI’s firm stand on interest rate cut is testimony to the fact that it is not only the central bank’s policy which is solely responsible for slowdown in the economy but the government’s policies should also be held accountable. When we look into the central bank’s role in economies all across the globe, it is evident that it plays limited role in driving the economy. Rather, it can only contribute to the extent of containing the inflation.   RBI’s decision to keep interest rates unchanged indicates that containing inflation is in its top agenda at the moment and government should take responsibility for decisions regarding revival of the economy. However, it cannot be denied that with interest rate cut, India Inc would have got some respite but the RBI’s logic cannot be looked over where it says that present interest rates are lower than the interest rates when the economy was growing at rapid pace. 

Ironically, Finance Minister Pranab Mukherjee had also expressed hope that the RBI should cut interest rates and with no change in interest rates it is now clear that there is lack of coordination between the government and the RBI.  In such a scenario when there are negative cues from all corners, government is often blamed for its inability in taking prompt decisions. Situation has got worsened with second international rating agency Fitch downgrading India’s outlook to negative. Earlier, Standard and Poors had threatened to declare India unfit for investment. With repeated downgrade and warning from different international rating agencies it can be inferred that there is some problem with the policy implementation. It is also pointed by the agencies that policy paralysis within the government is major reason behind delay of economic reforms. Major international agencies, economic experts and institutions, all have blamed the Centre for policy paralysis. However, politicians are still busy finding reasons to play blame game. Now, the time has come for the politicians to change their attitude for betterment of the economy which can easily get out of hand sooner than later.