Government- RBI Tango That Set the Stage for Note Ban

Unofficial bio of RBI a must-read for those interested in Indian political economy, particularly its monetary history, policy and politics.

- Biswajit Choudhury

This is the best short history to have appeared of the Reserve Bank of India (RBI), its release being most aptly timed post-demonetisation, to coincide with the commemoration of the apex bank’s founding on All Fools’ Day of 1935.

Demonetisation figures only in the cover image, for the book’s cut-off date is 2008, after which, the author says, the “institution has been diminished in too many ways... not least because the government has wrested back the autonomy the RBI had begun to enjoy after 1992”. Given that the central bank had no role in conceiving demonetisation, the event’s absence in the text doesn’t detract from the brilliant exposition of governmentRBI relations.

Indeed, it is the first unofficial, but authoritative, history of the RBI, laying bare for the lay reader the relationship between the RBI and government.

Without actually posing it, the book prompts the question why Raghuram Rajan, who was the first Governor appointed from outside the government system, also became the first, since Independence, not to have his tenure extended. Was it because he wouldn’t have readily agreed on the virtues of demonetisation, which helped Prime Minister Narendra Modi reap an electoral harvest last month in Uttar Pradesh?

With the RBI not having a role in conceiving it, demonetisation ends up as a political move that touched the purificatory, cleansing chord in the Indian psyche, and which sentiment a campaign like Modi’s Clean India seeks to energise in a collective effort. The stated objectives of demonetisation were to eliminate corruption, black money, counterfeit currency and terror financing.