India RBI spat a flashpoint as easy money era ends

Bloomberg

India is the latest country to see age-old tensions between governments and central banks flare up as the era of easy money draws to a close.
Prime Minister Narendra Modi’s government sent the central bank letters that cited a never-used power to overrule the Reserve Bank of India in a bid to push through measures that would unleash spending ahead of an election, Bloomberg reported.
That triggered a feisty speech from a central bank deputy in defense of independence, which brought the spat into the open.
As the rift looked set to deepen, the government appeared to ease tensions, issuing a statement saying it “respects and nurtures” central bank autonomy. That helped the rupee strengthen while the benchmark stock index added to gains from the previous trading session on speculation the situation may improve now.
The tension in India mirrors central bank fights playing out in countries as varied as the US and is unlikely to go away soon. Modi faces reelection next year, and he wants banks to dole out loans quickly to keep the world’s fastest growing major economy firing. Wary of already high bad debts, emerging market strains that are pressuring the rupee and threatening to add to inflation, central bank Governor Urjit Patel has other priorities.