Well spoken, Governor patel

The difference between a genuine leader and a person sans such abilities is the acceptance of responsibility. Throughout his career, Reserve Bank of India Governor Urjit Patel has been known to be uncommunicative and prone to silence. Even in official dinners, the RBI Governor’s economy of language brings back memories of US President Calvin Coolidge. Once, when he was asked to say a few words to an individual who had bet that he would get Silent Cal to say at least three words, the President’s response was: “You lose.” In a democracy, the people expect those at the helm of policy to enter into a conversation with them, and the need for this was nowhere more evident than during the period following the shock withdrawal of 86% of India’s currency on 8 November. Although instruction upon instruction (quite a few of them confusing and contradictory, at least to those unschooled in the arcana of Central banking) got published in the newspapers, there was only silence from the Office of the Governor of the RBI. This led to all manner of conclusions being made about a decision that is probably the most momentous and consequential in the annals of independent India since Jawaharlal Nehru consulted his “inner voice” and a few Fabian socialist friends from his UK days, and opted for Soviet-style planning for the economy, turning his back on less repressive and less statist models. The consequence was that by the 1980s, India remained a pathetically poor country, while East and Southeast Asia made much faster progress. South Korea, which had been devastated by the war which took place in the 1950s, is today more than 15 times as wealthy as India in terms of average living standards. Hopefully, the demonetisation so persuasively argued for by Prime Minister Narendra Damodardas Modi himself will have the reverse effect, and ensure a cleansing of the economy as well as a ramping up of economic growth. The jury is still out and only by the close of this year will it be evident whether the bold measure which the Prime Minister has showcased as a signature achievement is a success or not.

Much of the responsibility for success lies at the door of the RBI Governor. It is Urjit Patel who must ensure that the economy has sufficient liquidity for growth, and who must ignore the pressure

of the ideologues of cashlessness (who range from Bill Gates to India’s own tech billionaire, Nandan Nilekani) to starve the economy of paper currency and thereby force the 1.26 billion people of India to adopt systems for which neither mindsets nor physical infrastructure is ready. Economic policy needs to be based on ground reality, rather than in theories woven in textbooks by academics. Certainly, there needs to be greater and greater use of non-cash methods of exchange, but such a change needs to come about in a fashion aligned to the overwhelming necessity to ensure high growth, without which social cohesion will be more difficult to ensure. The good news is that Governor Patel has removed the misleading impression created by the RBI itself in an earlier communication that he and his colleagues were in a sense made to endorse the 8 November measure by the Narendra Modi government. The Governor has made it clear that the decision to demonetise was carefully thought out over the period of a year, and was arrived at only after a careful examination of its merits and possible pitfalls. It took courage for Governor Patel to step forward and accept responsibility for a measure that bids fair to be at the centre stage of economics and politics in India for a while. Congratulations for your candour, Governor Patel.