The BJP as a party overexposed Prime Minister Narendra Modi during the Delhi and Bihar Assembly elections and the same error has been made by the Reserve Bank of India (RBI). A currency swap is entirely the responsibility of the RBI, which has enjoyed autonomy from the Ministry of Finance precisely to ensure that the Central bank directs monetary policy, while the Ministry of Finance frames fiscal policies. Even during the tenure of UPA favourite Raghuram Rajan, the Modi government showed utmost respect to the Governor of the RBI, despite the fact that the Chicago School economist was systematically slowing down or killing small, medium and even some large-scale industries by a policy of ultra-high interest rates, not to mention the damage done during his tenure to the service and infrastructure sectors. As the newly appointed RBI Governor Urijit Patel is in the driver’s seat on monetary policy, it follows that the scheme which was announced not by its Governor but through Prime Minster Modi on 8 November was the RBI’s brainchild. Of course, this must have been discussed by Patel with officials such as Secretaries Hasmukh Adhia and Shaktikanta Das as well as Principal Secretary to the Prime Minister, Nripendra Mishra, who has been a champion of the 8 November currency swap scheme from the very beginning of its being discussed. However, at all stages, it would have been the RBI which had the final say on a monetary policy that affects every citizen of India. Given this, the measure ought to have been revealed to the public by RBI Governor Urijit Patel. Passing on such a task to the Prime Minister has unintentionally conveyed a misleading impression about the autonomy that the RBI has under the Modi government.

Not only the 8 November announcement, but subsequent mentions of tweaks to the policy have also been handed over by the RBI to the Finance Ministry, with a particular Secretary making such announcements on almost a daily basis, when this task should have been carried out by a Deputy Governor or an Executive Director of the Central bank. Each such announcement of monetary measures that emanates from the Finance Ministry, rather than the RBI, reinforces the incorrect assumption that with Rajan leaving the bank, so has the autonomy of our country’s Central bank. This when PM Modi, in line with international best practices, has ensured autonomy to the RBI. Certainly Governor Patel may be media shy and very modest despite his high attainments. However, his is not a job where the incumbent has the option of retiring behind a curtain of silence for the whole of his or her tenure. After all, the RBI Governor has, by his signature, guaranteed that each currency note will be honoured in full by the institution he now leads. Since 8 November, the RBI (despite repeatedly revealing that it has ample currency stocks) has been less than effective in ensuring that the currency in its possession reach wherever it be needed in a timely manner. As a consequence, the misery of the public is rapidly becoming unbearable. A Prime Minister of the savvy of Narendra Modi would never have taken the political risk involved in endorsing a currency swap involving 85% of the total cash in circulation, without first being assured by the RBI that currency stocks in its possession were sufficient to prevent the severe disruptions now being seen in commerce and in the citizen’s everyday life. Such an assurance of ample supply of cash with the RBI must have been minutely examined at various levels by the Finance Ministry and the Prime Minister’s Office. From all this, it is clear that the Central bank has the means to ensure liquidity in the economy sufficient to prevent a cash shortage, which indeed is among its core functions. The fact that severe cash shortages are taking place even ten days after the swap was first announced, indicates that the Central bank of the country may not be living up to the written assurance of each RBI Governor that each currency note remains exchangeable in like value instantly on presentation. The severe and disruptive restrictions imposed on moneys which can be withdrawn from the accounts of citizens, added to the fact that ATMs across India are empty of cash for much of the day and often week, goes contrary to the RBI Governor’s solemn assurance, and unless Urjit Patel acts with despatch, loss of faith in the word of the RBI Governor may spread to the broader population. That the new notes are as devoid of cutting edge security features as the old, plus the fact that this swap has been more than six months in the pipeline, makes what is being witnessed across the country inexcusable for a Central bank with a tradition going back more than eight decades.

The “Lutyens Zone” is less a geographical construct than it is a state of mind, and its denizens are masters of media spin. Many are already seeking to create distance between the 8 November declaration and themselves by claiming that the new currency was to be rolled out only on 1 January 2017 and that the decision to pre-pone the launch drastically was made by the Prime Minister. In view of the administrative record of Narendra Modi, it is impossible to believe that he would pre-pone such a monumental scheme unless the relevant authorities assured him that they were prepared. Statements coming from the RBI show that cash in hand is not the problem. Rather, it is insufficient speed in ensuring that enough liquidity to maintain high growth and employment flows across the many sectors suddenly drained since 8 November of 85% of their cash. Through faster replenishment of cash in banks, ATMs and other distribution centres and much greater ease in the processes devised for withdrawal of cash, it is imperative that the RBI ensures that the liquidity situation prevailing across the country and its economy return to the pre-announcement level within the 50-day period promised by PM Modi. The RBI taking more time than that for the present cash shortages to disappear would be cruel and indeed criminal.

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