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"There is no such thing as blanket independence. RBI is independent within the limits set by government.” That was the former Reserve Bank of India (RBI) governor, YV Reddy, widely acclaimed for his role in protecting India from the worst of the 2008 global financial crisis. Reddy was responding, in his inimitable style, to questions about RBI independence during his less-public runins with the then finance minister, P Chidambaram.Friction between the RBI and the government is not new. It goes back to the first governor, Osborne Smith, and continues to date. What is different now is the very public nature of the spat. And on issues such as RBI’s control over public sector banks, the need to protect its balance sheet and proposal to set up a separate payments regulator; issues on which the public cannot be expected to have an informed opinion.Central banks, with their esoteric and arcane tools like open market operations, liquidity adjustment facility, sterilisation (not of the Sanjay Gandhi kind), etc, are not the stuff of public debate. Or, indeed of leisurely Sunday reading!Sure, Raghuram Rajan , the former RBI governor, made waves with his looks. And there was that weekend after November 8, 2016, when demonetisation brought RBI centre-stage. Its endless tweaks to rules on surrendered notes ensured it remained in the public eye for a couple of weeks.But once the noise over demonetisation died down, like central banks across the world, RBI retreated to its ivory tower. It emerged every two months to make its bi-monthly policy announcement. But save for the few occasions when it hiked interest rates, the man on the street did not lose much sleep over the Bank. Till October 26, 2018. That was when deputy governor Viral Acharya fired his bazooka!Unlike former US Treasury Secretary, Hank Paulson, who threatened, but never fired his weapon, Acharya did the unthinkable. In a speech, that he was careful to mention had the sanction of RBI Governor Urjit Patel , he virtually declared war on the government.Comparing India, a country that has never defaulted on its debt, with Argentina, a country that has defaulted seven times on its international debt and five times on its domestic debt, Acharya held out a thinly-veiled threat.“Governments that don’t respect the independence of their central banks will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution,” he said.If Acharya was hoping to make a splash, he certainly succeeded. Immediately after his speech, all hell broke loose. After all, never in the history of RBI had a deputy governor sounded the battle cry; and so stridently.Remember, this is a government that has given RBI near-complete autonomy in framing monetary policy by designating it an inflation-targeter. It has also strengthened the Bank’s hands by passing the Insolvency and Bankruptcy Code!This is not to say the Reserve Bank has no reason to complain. There is a grain of truth in what Acharya said. There is a tendency for governments everywhere, including in India, to frame policy with an eye on the next elections, while central banks have a longer time-frame.As Acharya put it so colourfully, governments play a limited overs T-20 cricket match while central banks are into Test matches, trying to win each session; but importantly, surviving it so as to have a chance to win the next session. But that’s not the only difference. There is another, far more fundamental, difference that he chose to gloss over.In a democracy, sovereignty lies with the people. And government, not the central bank, is answerable to the people. If the Reserve Bank, for instance, fails to keep inflation low, it is the government that pays the price, not RBI!Yes, we need independent institutions to provide checks and balances to government. But as Mark Carney , governor Bank of England put it, “It is important not to confuse independence with omnipotence!”It is a different matter that despite Acharya’s warnings, markets have ignored him so far. The BSE Sensex gained more in the week after his speech than in any week during the previous two years! The unpalatable truth is the rift between government and RBI is now out in the open. With potentially disastrous consequences. This is where Acharya erred.He failed to realise that in its quest to win the current Test match, the RBI has, perhaps, queered the pitch so badly that successive governments, regardless of hue, will take care to appoint only yes-men to the top job. And that would be far worse!Central banks must survive to play, though not necessarily to win, not just the next session but subsequent test matches as well. As rumblings continue, despite talk of burying the hatchet, the trick, a moreseasoned central banker might tell him, is to take a leaf from the famous Johnny Walker ad and Keep Talking!