Burden of being always right
Columns, Point of View

Burden of being always right

November 6, 2018

By T.J.S. George

Finance Minister Arun Jaitley has the advantage of knowing that he is always right. Reserve Bank Governor Urjit Patel has taken his own time to learn that. Which is Patel’s problem. He started out as Jaitley’s handpicked man to replace Raghuram Rajan who simply had to go as Arvind Panagariya had to go and Arvind Subramaniam had to go. The international celebrity that he was, Rajan thought he knew banking and finance a tad better than the Finance Minister whose foundation, after all, was in law. But he forgot that the Minister was a politician, and politicians are wizards in all subjects from finance to rocket science.

Urjit Patel functioned obediently in the early days. When the country reeled under the impact of the half-baked, hastily implemented demonetisation two years ago, Patel became the target of attack by harassed citizens. The attacks grew harsher as ATMs failed as did RBI guidelines to restore some order. Patel bore the brunt of people’s wrath. The Reserve Bank was called the Reverse Bank.

The first sign of the RBI Governor trying to regain his reputation was the bank’s annual report a few months ago which showed that 99.3 percent of the banned currency had returned, thus putting an official stamp on the failure of demonetisation. Patel took another bold step when he asked banks to restructure their non-performing assets or initiate insolvency proceedings against borrowers, a move that could embarrass the Government which has distinguished borrowers among its friends. The RBI has also been taking a stand against banks that have been in the news for the wrong reasons though its hands seem to be tied in some cases (ICICI, for example).

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The question now is not whether the RBI Governor has caused displeasure in the Finance Ministry, but how deep-going is the displeasure. Disagreements had fanned speculation about the Ministry imposing a section of the RBI Act that would make the Bank subservient to the Government. Adding fuel to the fire was a speech by RBI Deputy Governor Viral Acharya that went viral. He warned: “Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets and ignite economic fire.” Even the General Secretary of the Reserve Bank Employees’ Association indicated the way the wind was blowing inside the venerable institution when he said there must have been pressing reasons for Acharya to say what he said publicly.

The words of the Finance Minister, however, leave no scope for debate: The RBI is at fault and has been at fault for a long time. When the previous Congress-led Government allowed indiscriminate lending by banks, he said, the RBI failed to check it. “It was a regulator but it kept pushing the truth below the carpet,” as Jaitley put it.

Jaitley has two powerful qualities that lend strength to his assertions: His conviction and his concern with only the facts he mentions; other facts do not exist or are a political conspiracy. A parliamentary committee reported in August that non-performing assets went up by Rs. 6.2 lakh crore between March 2015 and March 2016, forcing the Government to provide public sector banks with Rs. 5.1 lakh crore. Is that truth above or below the carpet?

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What happened under the BJP Government happened under the Congress Government as well, showing the non-alignment of the powerful. Raghuram Rajan said in his 2017 book that large numbers of bad loans originated in 2006-2008 when too many of them “were made to well-connected promoters who have a history of defaulting on their loans.” The lesson which will not surprise citizens is that it doesn’t matter who governs, plundering will go on.

Jaitley doesn’t like anyone to disagree with him. So he let it be known that he wanted the RBI under stronger Government control. Clashes between the political order and the central bank are a familiar thing the world over. But always wisdom has prevailed, governments leaving the central banks effectively autonomous. This time also wisdom must prevail.

To achieve that end, it will be helpful if Jaitley shows a wee bit more respect to people with different views, not unusual in a democracy. Assertions by an RBI Governor need not necessarily be seen as anti-democratic. A former BJP Finance Minister need not be dismissed as “a job applicant at 80.” The leader of the main opposition party need not be called a “clown prince.” Arun Jaitley is, of course, always right. But should it mean that all others are always wrong?

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4 COMMENTS ON THIS POST To “Burden of being always right”

  1. Ramu says:

    Leader of the opposition calling the popularly elected Prime minister our nation a CHOR that is OK George?
    THE Congress party spokesperson calling Narendra Modi the PM a birdpoop that should not have any issues.
    THE queen mother of the opposition party calling MODI Mauth la Suadaagar Merchant of death after supreme court found not an iota of evidence, that must be OK.
    And what about Modi being called a scorpion which deserves to be hit with Chappals? And the Neech remarks?
    Our PM is honoured as the third best global leader while George’s , a few Mullahs and their supports in the media sling the mud on a daily basis! Even islamic nations are praising him !
    George sir! Please get a life! You say our Finance Minister calls Rahul a clown prince you find fault with IT, BUT YOU DONT SAY WHY HE CALLED HIM SO, THE REASON WAS HE CALLED PM a CHOR! If looters calling the honest men as chor , then Sunny Leone Can call Sita of Ramayana, a whore! All we need is supporters like you Who have personal agenda!

  2. Nagarika says:

    Let us not forget the sayings of the Gandhi Family servant Mani Shankar Iyer. Before Modi and the BJP was elected, the clown MS Iyer used to mock Modi by saying he can come and work as Chai Walla at Congress Party HQ in Delhi.
    This is the same MS Iyer who went to Pakistan, after Modi became prime minister, asking Pakistani politicians to help to bring Modi and BJP Government. In my opinion that is Sedition. Congress of Sonia has all these pseudo intellectual gulams kissing her feet. It is OK by George! Get a life George!

  3. Rao says:

    Hold on!
    What were great BJP calling Man Mohan Singh?
    So stop taking sides, both have done it, doing it and will do it in future too.

  4. Ravi says:

    Thanks to the book ADVISE AND DECENT of RBI Governor Y.V. Reddy*
    In the Shashan period of Congress, we had to pledge 47 tons of gold for just Rs 40 crore.
    This was the situation of the Indian economy.
    I remember the Indian economy had to see the day in the early nineties when a country like India had to deposit its gold in the World Bank.

    In the rule of Rajiv Gandhi, the country’s safe was empty. And then the assassination of Prime Minister Rajiv Gandhi was done by the LTTE terrorists.
    Chandrasekhar then became the new new Prime Minister … The Tijori was empty. They got nervous What to do?
    Reddy writes that there was a frustrating atmosphere in the entire country. The Rajiv regime had not given any employment.
    New business is not a business … to enter a business, then to get NOC from fifty places.
    Unemployment and frustration all around the time of the license permit set by the Congress …..
    On the other hand, the battle of Mandal and Kandal was fought in the country ……
    From eighties to the nineties, *the Congress had put an end to the economy …* at that time the case of brokerage in Bofors guns came out …..
    In the book, Reddy writes that *the immense loot of the Gandhi family has brought the economy of the country to the abyss.*
    In his book, Reddy writes that in those days India’s foreign exchange reserves had so low that the Reserve Bank of India decided to mortgage its gold in the World Bank … the situation was that the country had only 15 Days were worth the money to import.
    Then by the order of the then Prime Minister Chandrashekhar, India pledged 47 tonnes of Gold to Bank of England …
    At that time an interesting incident and an embarrassment to the Indian public was reported … RBI had to pledge 47 tons of gold in the Bank of England. This was the time when mobile was not there and the land line used to be in limited quantity.
    It was such a bad situation for the Reserve Bank of New Delhi that 47 tonnes of gold from the building was to be delivered by a van on the New Delhi air port. From there, the gold was to be placed on the ship going to England.
    With 47 tonnes of gold, a very old RBI private van was sent with two security guards, on the way to air ports its two tires were reduced to halfway.
    As the tyre punctured, those two security guards surrounded the van filled with 47 tons of gold.
    After this great effort, 47 tons of gold reached England, and Britain gave loans to India Rs 40.05 crores.
    I gave an example of this sad incident related to the Indian economy, so that people will know that *the shameful leader of Congress, who accused Modi of financing the economy of the country, is that great Gandhi Because of the family’s odds, the country had to mortgage its gold only to get a loan of 40 crores.*
    What can be more shame and shame than for a country.
    I am extremely laughing, shocked and angry when people who mortgaged for the country for just Rs 40 crore say that Modi ruined India’s economy.
    *In the 70-year history of Hindustan, there are only 3 years in which Hindustan did not take loans of one rupee from World Bank.*
    *And they are three years.*
    *2015-16, 2016-17, 2017-18*
    *And yes these three years come in the government of Chaaywala.*Yes


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