important that the mandate of the reserve bank is written into the statute, so that it is protected from the political dynamics of changing governments. 57. in the opening part of my lecture today, i explained the rationale for an autonomous central bank. like in most other developing economies, the reserve bank was not born autonomous ; it gained its autonomy over time as a result of the lessons of international experience and the maturity of our political executive who saw the benefits of preserving the autonomy of the reserve bank. on its part, the reserve bank earned this autonomy by staying committed to the pursuit of larger public interest. 58. accountability is the flipside of autonomy. the reserve bank of india act does not prescribe any formal mechanism for accountability. over the years, however, certain good practices have evolved. let me briefly illustrate. we explain the rationale of our policies, and where possible indicate expected outcomes. the governor holds a regular media conference after every quarterly policy review which is an open house for questions, not just related to monetary policy, but the entire domain of activities of the reserve bank. 59. the reserve bank also services the finance minister in answering parliament questions relating to its domain. most importantly, the governor appears before the parliament ’ s standing committee on finance whenever summoned, which happens on the average three to four times a year. 60. it has often struck me that for a public policy institution with such a powerful mandate, these mechanisms for accountability are both inadequate and unstructured. perhaps, we should institute an arrangement whereby the governor goes before the parliament standing committee on finance twice a year to present a report on the reserve bank ’ s policies and outcomes and answers questions from the members of the committee. in my view, this will not only secure the accountability structure but also protect the reserve bank from any potential assaults on its autonomy. 61. i have dwelt a bit longer on this last challenge of autonomy and accountability if only because we have not debated this in the larger public domain as much as we should have. and to the reserve bank staff, i want to say that they must be as zealous about rendering accountability as they are about guarding its autonomy. bis central bankers ’ speeches thank god, the reserve bank exists 62. a final thought on this issue of autonomy and accountability. there has been a lot of media coverage on policy differences between the government and the reserve bank. gerard schroeder, the former german chancellor, once said, “ i am often frustrated by the

09, evidencing the depth of india ’ s financial integration. 14. what this meant was that as the global financial and economic conditions went into a turmoil, we were affected through trade, finance and confidence channels. the reserve bis central bankers ’ speeches bank responded to the crisis with alacrity, with policies aimed at keeping our financial markets functioning, providing adequate rupee liquidity, and maintaining the flow of credit to the productive sectors of the economy. lessons in crisis management 15. as someone said, this crisis was too valuable to waste. in the event, we learnt several lessons in crisis management. i will only list the important ones. first, we learnt that in a global environment of such uncertainty and unpredictability, policy action has to be swift, certain and reassuring. also, during crisis times, it helps enormously if governments and central banks act, and are seen to be acting, in concert. second, we learnt that action is important, but communication is even more important. when the economic environment is uncertain, market players and economic agents look up to governments and central banks for both reassurance and clarity. indeed, communication was a critical tool all central banks, including india, adopted in those heady autumn days of 2008. 16. the third lesson we learnt is that even in a multi - nation crisis, governments and central banks have to adapt their response to domestic conditions. there is typically pressure on every country to copy the crisis response of other countries, especially of advanced economies ( aes ). for example, aes were forced to resort to quantitative easing ( qe ) to loosen monetary conditions, raise inflation expectations and lower real interest rates. was there any need for emerging market ( em ) central banks to do so? i believe there wasn ’ t because they had sufficient conventional ammunition left. instead, what we had to show was that we were fully prepared to use it. 17. while on the subject of crisis, i also want to share with you a dilemma. crisis management is a percentage game. we have to do what we think has the best chance of reversing the momentum. at the same time, we have to weigh the short - term benefits against the longer term consequences, including moral hazards. in 2008, massive infusion of liquidity was seen as the best bet. indeed, in uncharted waters, erring on the side of caution meant providing the system with more liquidity than considered adequate. this strategy was