Wish all the readers of ‘Tiger and Palm Tree’ season’s greetings and best wishes for a happy new year. Please see below the questions in Reserve Bank of India Quiz 2021. I will post the answers next week.
That wretched woman with the infant in her arms, round whose meagre form the remnant of her own scanty shawl is carefully wrapped, has been attempting to sing some popular ballad, in the hope of wringing a few pence from the compassionate passer-by.Charles Dickens, Sketches by Boz
“Cooperation has failed, but cooperation must succeed,” is an oft-quoted extract from the 1954 report of the All India Rural Credit Survey Committee (AIRCSC). Sir Benegal Rama Rau, the fourth Governor, Reserve Bank of India, appointed the Committee. No other financial sector was the subject of scrutiny by as many committees as Indian cooperation. The quote is believed to be the contribution of Burra Venkatappaiah, of the Indian Civil Service. Venkatappaiah was then the Reserve Bank of India’s first Executive Director, and a member of the AIRCSC. He later became Deputy Governor, and the fourth Chairman of the State Bank of India. Thereafter he chaired the All India Rural Credit Review Committee which reported in 1969. I have a separate post on Venkatappaiah coming up, but my focus here is on Indian cooperation. Continue reading “Indian Cooperation: Finding Raiffeisens”
The story of a former SBI Chairman’s arrest and release: the case of a resolution and retribution.
Sometime in early 2004. I was the last in-charge of the Reserve Bank of India’s Chennai Office of the (then) Department of Banking Operations and Development, now called the Department of Regulation. The following July the Regional Offices merged with the Bank’s Department of Banking Supervision (now Department of Supervision). Late in the afternoon, a short and quiet person walked in unaccompanied. He had recently taken over as the Chief General Manager of the Chennai Circle of State Bank of India. Seven years later he became the Chairman of the bank. He needn’t have troubled himself to meet me. At least the Reserve Bank I knew and admired never stood by such empty formalities. Nevertheless, the simplicity and humility of the man impressed me. Therefore, the news of his arrest shocked everyone who knew him. Continue reading “Former SBI Chairman’s Arrest”
In the history of Indian currency and central banking, the Fowler Committee occupies an important position. But, its relevance went beyond the currency question. One suggestion that emanated from its report was Sir Everard Hambro’s central bank proposal. Hambro suggested establishing a state bank along the lines of the Bank of England and the Bank of France. Hambro’s central bank proposal is contained in a brief note attached to the Fowler Report. It provided the rationale for the proposal. The suggestion went back and forth between Calcutta and London before it was dropped after objections from different quarters. Continue reading “Sir Everard Hambro’s central bank proposal”
Prof. Kaushik Basu in his “Policy Maker’s Journal” describes an incident where he and three friends, on a holiday in Cusco, Peru, were walking back to their hotel through deserted streets, when they saw a native girl, sitting alone and crying. Her mother had made her wait while she went home to fetch something. It was getting late, and she was hungry. But, they found food in her bag, and asked her to eat that. She said that they were for sale, and not for eating. They then bought some food, and gave her. We will never know whether she ate it. But, Kaushik was left “with an awareness of the human predicament that reading books and guzzling statistics cannot give.”
With such anecdotes, Prof. Kaushik Basu, Carl Marks Professor of International Studies at Cornell University, illuminates the account of his six-year foray into policy making. This included two years, 2010-12, as Chief Economic Adviser to the Government of India. The next four years were with the World Bank as Chief Economist.
Meeting Prof. Kaushik Basu
I first met Prof. Basu at a common friend’s house over dinner. A great conversationalist, he expressed an interest in knowing more about how currency in circulation was calculated. As someone who started his career in the currency vaults of the Reserve Bank of India, I was glad to oblige. But, that discussion never happened. Instead, he accepted an invitation to chair a half-day conclave that I helped organise at the New Delhi Office of the Reserve Bank. After he gave a convenient time, the other slots filled up soon. Finally, we had TN Ninan from Business Standard, TCA Anant, the Chief Statistician, and Ulrich Bartsch, then Head of World Bank’s Delhi Office. Prof Kaushik Basu delivered the keynote address and stayed with us for lunch thereafter.
We remained in touch for some time, for reasons other than the economy. He was intrigued by the then Tamil hit, Why this Kolaveri di? I realized much later that my laboured explanations of the song were unnecessary. I had forgotten that he had a Tamil connection through his wife, and did not need my interpretation (I had met once his co-brother in Hong Kong, in 2005). But, he sportingly played along.
Kaushik Basu was always quite dignified in his interactions and polite to a fault. I did not, therefore, waste the invitations he extended for the two Delhi Economics Conclave that he organised, and his book releases. One of them was the release of the two-volume New Oxford Companion to Economics in India, with Annemie Maertens, at the India International Centre.
Prof. Kaushik Basu shares many moments of learning, apart from the first anecdote. This includes his meetings with Kenneth Arrow, John Nash, and other great contributors to economics and finance. There are also embarrassing moments, like someone introducing him to an audience as one tipped to win that year’s Nobel Prize.
The book provides many instances where he contributed his insights to the policy discourse. This includes his stance on the different types of rights that were being promoted by the UPA government. According to him, such rights are meaningless unless if the government is capable of providing them. Another instance was his paper on dealing with corruption, where he suggested that bribe giving be decriminalised when it is paid to get legal things done. This would help bring out such cases. The proposal perhaps had a flaw in that the practical implications were not thought through. Nevertheless, it created a furore at a time when various scams were hitting the headlines, and died a slow death.
The humble and upright Kaushik Basu
There are numerous anecdotes where the basic humaneness and humility of Kaushik come through. One favourite is where he had to sit through a quiz. Two questions on who wrote a particular book had the same answer, Kaushik Basu. He was, no doubt, pleased and proud. But, the realization that nobody, even the audience, knew the answer, brought him back to earth. Kaushik is quick to acknowledge the contributions of others, including former students, colleagues, teachers, and fellow economists.
The Policy Maker’s Journal refers to instances of Prof. Basu’s uprightness and frankness. Like when he advised the new Finance Minister, Arun Jaitley, that he call on Manmohan Singh before his first budget (Jaitley did). Or when he denied admission to the Vice Chancellor’s daughter at the Delhi School of Economics. How he ignored Sheryl Sandberg’s suggestions to drop unflattering references to Facebook in the World Development Report. Or how he ignored gentle suggestions from Pranab Mukherjee, then Finance Minister, pushing a certain (unnamed) candidate as Vice Chancellor of Santiniketan (The FM did not mind).
Apart from the Delhi Economics Conclave, his achievements included the Stockholm Statement as a counter to the right-wing Washington Consensus. Apart from decriminalising bribe paying, the unfinished initiatives included a Living Life Index, somewhat different from the Ease of Living Index since introduced. Among the misses is perhaps a discussion on the gross national happiness during his Bhutan visit.
Kaushik Basu’s “Policy Maker’s Journal” is not without instances where one hoped for more clarity and elaboration. After his first meeting with Prime Minister Narendra Modi, by when he was with the World Bank, he “left his office feeling good.” But, a few months later, he advised President Obama to remind India’s leaders of its heritage of democracy and secularism, and “urge them to preserve it.” The new government was just a few months old. Obama was the Chief Guest at the Republic Day parade. In one of his last engagements, a lecture at the Siri Fort, he did “remind India of its heritage of democracy and inclusiveness, and how some shadows had been cast on this in recent times.” This did raise a furore, and not just for the political incorrectness.
In the interest of completeness, Basu could have spelt out what made him change his view after that first meeting with the Prime Minister which he left feeling good. Even in the absence of the Obama episode, an update on his views of 2014 is left hanging when published in 2021. This would have made many admirers happy that it was not just another off the cuff remark. Hopefully, Prof. Basu is keeping this for a later book.
Kaushik Basu and the Congress
Prof Basu does not conceal where his political sympathies lie. In his last meeting with Sonia Gandhi as CEA in mid-2012, they had frank discussion on various political leaders. This included Mamata Banerjee, Narendra Modi, Subramaniam Swamy, the communists, and the RSS. He confesses to having political views that are aligned to hers.
Prof. Basu lists three important qualities of Rahul Gandhi which would make him a good leader, though he is not a natural political leader. First, honesty and transparency. Second, that he is a good listener. Third, he is not infatuated with power, and is willing to give it up gracefully.
In my view, the majority in the country would not consider these as sufficient conditions in their conception of a future Indian leader. The era where anyone can be catapulted into positions of power on sheer strength of political lineage has passed. Those who remain had either proved themselves earlier in ministerial positions, are heading unstable alliances awaiting their political denouement, or for a more robust and credible political formation to come up. The majority would yearn to see hard evidence of performance and delivery rather than distant promises based on assumed qualities. Considering this, Rahul Gandhi perhaps erred in letting pass invitations to join the Manmohan Singh cabinet and prove himself like Indira Gandhi who gained experience and confidence serving in the Nehru cabinet.
The above is, however, key to Prof Basu’s meetings with the Congress leader whenever the latter wanted, and his addresses exclusively for Youth Congress leaders and Congress MPs. These would have been unprecedented for a government functionary even if he were on a fixed term appointment. One cannot recall another CEA, before or after, addressing a political audience solely of one hue.
The Policy Maker’s Journal is a great read with the Kaushik-esque take on many issues, his understated humour, and restrained sarcasm, often self-deprecating. I enjoyed reading the book notwithstanding a few minor errors (2020 instead of 2012), names of people presumed to be known, and a few points of disagreement. I am already looking forward to the next big one.
Kaushik Basu, Policy Maker’s Journal – From New Delhi to Washington, D.C., Simon & Schuster, 2021. Rs. 699.
© G. Sreekumar 2021.
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Five years after it implemented the Herschell Committee recommendations in 1893, the Government of India made fresh proposals. The British Government, in turn, appointed the Fowler Committee in 1898 to examine these proposals.
In 1893, as endorsed by the Herschell Committee, and approved by the British Government, the Indian Government discontinued silver coinage. The intention was to eventually introduce a gold standard, the most important step in ensuring an exchange rate of 1s. 4d. This was not achieved for nearly five years. Therefore, the Government of India submitted fresh proposals to the Secretary of State for India to hasten the process. Some of these were drastic. These included the sale of bullion worth £ 6 million. There was also to be a sterling loan issued to make good the loss. Continue reading “History of Indian Currency: The Fowler Committee”
The Case of the Reserve Bank of India Circular on Opening Current Account
An oft cited paper in the literature on regulation goes by the title “Gentle Nudge vs. Hard Shove”. The regulatory dilemma is exemplified by the recent case of the Reserve Bank circular on opening of current accounts. Years of “gentle nudges” which did not result in banks complying with instructions regarding credit discipline seem to have resulted in “hard shoves” involving more hands-on regulation.
Some bank borrowers have taken the legal course demanding quashing of the Reserve Bank of India circular dated 6 August 2020 on opening current accounts by banks. The Bank has since further extended the last date for compliance to 31 October 2021. Continue reading “Opening current accounts in banks”
The Herschell Committee on Indian Currency, appointed in 1892, was the first of five Committees which examined India’s currency question. The other four were the Fowler, and Babington-Smith Committees, and the Chamberlain, and Hilton Young Commissions. Prior to this, the Mansfield Commission had in October 1866 submitted a brief report on implementation of the Paper Currency Act 1861. There have also been various minutes on the subject. These includes minutes of James Wilson, the first Finance Member, Sir William Mansfield (later Lord Sandhurst), George Dickson, Secretary to the Bank of Bengal, and others. We will cover there in different parts. In the first part of this series, we discuss the Herschell Committee, which submitted its report in 1893. Continue reading “History of Indian Currency: The Herschell Committee”
Sir Purshotamdas Thakurdas next made a major contribution to the work of the Indian Retrenchment Committee. The implementation of the Acworth Committee recommendations, including greater investment for railway expansion and a separate railway budget, increased government expenses substantially. The government feared that it might not be able to meet these rising expenses. Following this, the government responded by cutting expenses even by laying off people wherever possible. To find the means of doing this, it appointed the Indian Retrenchment Committee, which functioned during 1922-23. Continue reading “Purshotamdas Thakurdas, Part 3”
In the next stage of his life, Purshotamdas Thakurdas, now in his early 40s, was pursued for being on various important Committees. The first such was the Acworth Committee. The reason must have been his balanced approach to all matters, in-depth knowledge and understanding of the commercial and financial aspects of various issues on hand, clear articulation in English, and fearless elucidation of his views even if they were unpalatable to the Chairman of the Committee/Commission, or its other members. This was a rare combination of qualities not commonly found even today. Continue reading “PT and the Acworth Committee”