RBI role in note ban

RBI role in note ban: Raghuram Rajan's observations make it abundantly clear that the RBI was associating with the groundwork for demonetisation from February 2016...

RBI role in Note-Ban*

Your editorial “The demonetization puzzle” (Business Standard, November 7) read with Subhomoy Bhattacharjee’s piece “The backroom story: How it all played out” demystifies the ‘Note-Ban’ of November 8, 2016. For those who have been following the happenings since November 8, 2016 and were not able to solve the ‘puzzle’ yet can find enough clues to move towards reasonably acceptable answers for questions like, why ‘Note-Ban’ was considered as an option to fight black money, why things went wrong mid-way, if they did and what was the role of RBI in providing backward and forward linkages in implementing the project ‘Note-Ban’ in its capacity as advisor to GOI and currency manager.
Dr Raghuram G Rajan is known for his clarity of thoughts and expression on monetary policy and central banking matters. His faultless book ‘Fault Lines’ and the recently released book ‘I Do What I Do’ carry enough evidence to prove this, if recorded evidence was necessary. But there has been an obvious deviation. Rajan’s one year silence post-exit from Mint Road and sudden reappearance and expression of views on the functioning of RBI after he had left have confused even Rajan-Fans inside and outside RBI.
Dr Rajan’s cautious observation about short-term economic costs outweighing long-term benefits of demonetization made almost one year after the event was a masterstroke. As the opinion against ‘Note-Ban’ was given ‘orally’ and a document on demonetization prepared by RBI approved by Rajan reportedly exists (not in public domain), enough damage has been done to the dwindling reputation of RBI.
Rajan’s observations make it abundantly clear that RBI was associating with the groundwork for demonetization from February 2016. Knowingly or unknowingly, Dr Rajan has exposed himself to the allegation of not getting himself involved in preparing RBI adequately to implement the ‘Note-Ban’, once a decision was taken by GOI.
M G Warrier, Thiruvananthapuram
*Submitted version

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