RBI and the Government

Published at December 03, 2018 11:19 PM 0Comment(s)2776views

Kamal Morarka

RBI and the Government

The tragic lack of trust between the Government and the Reserve Bank of India (RBI) has come into open. It is latest in line with the government’s inefficiency in dealing with things. The RBI is an autonomous institution, which keeps a watch on inflation and health of our currency, apart from being a regulatory authority for public and private sector banks. Initially when the economy was small, the governor of the bank was important. He worked in close coordination with the finance minister. The importance of the market increased after opening up of the market for private sector in 1991, which also caused increase in GDP and financial data. Now, how efficiently they deal with these matters depends upon the capabilities and skills of the finance minister and the governor of RBI. Before the current incumbent, P. Chidambaram was the finance minister and he was a bit inflexible in his working style – some called him egoist. His relationship with the then governor D. Subbarao Sahib was far from cordial. However, his tuning with Raghuram Rajan was good.

When the current government came to power and Arun Jaitley become finance minister, Raghuram Rajan was the governor of RBI. Rajan is a man of the Chicago Consensus. His thinking was different. I do not think the economist who studied in the United States is a smarter economist than the one who has studied in India. India is a country of 1.25 billion people, whereas the US population is somewhere around 200 to 300 million. They cannot tell us how to manage our economy. Indeed the US is a super rich country, but they do not give their money to us, then why would they tell us what we should do. If a person with American mindset comes to our country, he will work for America's interest. Take for example import-export policy. Every country wants its goods to be sold. The US also wants more and more goods to be sold in India. In arms sector they have edge because of their superior technology. They want Indians to import even those smaller things that can be manufactured easily at home. Now enters China, to give a tough day to the US. China inundated the Indian market with mobile phones that could have been easily manufactured in India. This government has a lot of love for China and Japan, but is afraid of the US. In fact only a man with spine should lead India. If you stand up from the chair on getting a telephone call from Trump, then you are incapable of leading the country. On the occasion of the Republic Day parade, the government wanted to invite Mr. Trump, but he rejected the invitation, maybe he thought that Modi ji is a fading star, not the rising one. Why should he add his name with Modi? The person who will become the next prime minister he will engage with him. Every country keeps its interests first, and there is nothing wrong in it.

We are so low in self-confidence and self-esteem that we raise objections, when the US imposes a stricter visa regime. It is their prerogative to allow or disallow somebody to visit their country. Moreover, this also gives rise to the question: Why do you want to go to America? It is because you have created the impression in the minds of the youth that America is the destination of attaining good fortune. Modi has a lot of love for NRIs, but the NRIs and foreign portfolio investors in the month of October only withdrew $5 billion from India.  There was nothing surprising in it, because money flows in the direction where the chance of its multiplication is prominent. NRI investors withdrew their money when Indian market slanted towards recession, as nobody, especially foreign investor, has come here on a philanthropic mission.

Now let us come back to the original question: What is the matter of discord between the Reserve Bank and the Government? The government nominated S. Gurumurthy, a chartered accountant and intellectual with proximity with the RSS, on the RBI’s board. In board meeting he says that if there is a paucity of money, at least be generous in granting micro loans to the MSME (Micro, Small and Medium Enterprises), but the RBI governor and his deputy, Viral Acharya, have something else on their minds. They are singing to the tune of the United States; they want the medium and small sector enterprises to be closed down so that only 20 to 30 big business houses could run their business in connivance with America. Gurumurthy was the convener of the Swadeshi Jagran Manch. He believes, and rightly so, that India can progress only when millions of Indian entrepreneurs and farmers will progress. A farmer can get maximum dividend from his produce only when an agro-based unit is set up near his village. But Gurmurthy’s efforts fall on deaf ears of the RBI. Arun Jaitley does not have the power to convince the governor of the Reserve Bank.

Be it the Congress government or the one run by the BJP, they have their own limitations. I do not support BJP's policies, but I do support the government's right. Who on earth the RBI governor and his deputy are! They should immediately be shown the door. Are we here to save the job of a few people or salvage the country? The finance minister should unambiguously tell them either obey his direction or quit the job. Finish the matter in two minutes. At present, Section 7 of the RBI Act is in discussion. Modi and Rahul Gandhi have a lot of mud-slinging against each other with Rahul Gandhi objecting to government’s using Section 7. He is saying that the government ruined the CBI and now is in the process of undoing the RBI. I do not agree with him. I think it is the RBI which is ruining the country. In fact the government is ruining the RBI by not dismissing the governor and the deputy.

The government came out with the slogan of “ease of doing business”. It is an international ranking given by the World Bank and measured on different standard of ease of doing business. Earlier we were at number 130th, then progressed to 100th and now improved our ranking to 77th. This ranking is decided by the United States. If you will close all your industries, they will put you at the top of the list, because the American market works on the principle of “Doing Business” and “Closing Business”. Indian market does not function on the principle of closing the business even if it goes through a bad phase. In India we do not cast our elderly parents out of our homes. This is the western values where they put their parents in Old Age Homes. Ours is Santani tradition. We do not sell our parents for a few bucks.

Modi used to say that we need a Congress-free India. Later, he clarified that by Congress-free India he meant getting rid of Congress culture, where everything was done for money, elections were won through money. But in these four years, they have beaten the Congress in their own game. The Congress never spent so much money on elections as BJP is spending now. Nobody in history has misused power as Amit Shah has. As I have said before that the BJP has proven in the last four and a half years that they are not capable of running the country. They cannot lift their talk from above Municipality or Panchayat level. Topics like the country's economics, foreign policy, security are beyond their understanding. Modi cannot make-up his shortcomings by just giving speeches. Chandrasekhar, who was our leader, used to say that no amount of good speech would convert one kilogram of wheat into two kilograms. For Modi, speech is the alternative of everything.

BOX: BJP has proven in the last four and a half years that they are not capable of running the country.

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