Tuesday, August 27, 2013

Saving Rupee or India Calls for Leaders to Unlearn and Relearn

“When I became the Governor, I had no great knowledge of what monetary policy is about,” admitted a former RBI Governor recently during a public function.

That is rather shocking, as RBI by definition is India's central bank that formulates India's monetary policy with regard to the Indian rupee. In other words, setting the monetary policy is one of the most prominent duties of RBI.

Before you jump into any hasty conclusion about the kind of people, our politicians have made RBI Governors in the past, a quick backgrounder on this ‘ignorant fellow’ is warranted.

Apart from his lack of knowledge about monetary policy, he was reasonably educated and experienced. He had worked for UNCTAD, was Adviser to Ministry of Foreign Trade, Secretary in Finance Ministry, and was Chief Economic Adviser to FM. By way of education, he had his post-graduation in Economics from Cambridge and his Doctorate in Economics from Oxford.

But monetary policy was monetary policy. If he didn’t know that, he didn’t know that. Period.

Having divulged that much, no marks for guessing who this ‘ignorant fellow’ was. PM Indira Gandhi and FM Pranab Mukherjee selected Dr. Manmohan Singh as the RBI Governor in 1982 for a couple of reasons.

Firstly, he seemed to know ‘a little more’ economics than either of them. Secondly, whether they knew about his ignorance about monetary policy or not, they knew that he was very capable of learning.

So, what did Dr. Singh do at that time? In that same recent speech, he continues, “…and therefore, I asked the late Prof. Sukhamoy Chakravarty to head a committee to look at the functioning, the goals, the means, and measures of monetary policy, and that report was pretty influential for a period of time.”

Yes, once upon a time, such strategies were enough. Those were simpler times. If you didn’t know anything, it was enough to learn. Of course, you should have the faculty for learning. We should call it the Manmohan era.

Even before that there was an even simpler era. When there was no great faculty for learning.

When Finance Ministry itself was occupied mostly by not economists but politicians. Jawaharlal Nehru, Morarji Desai, Indira Gandhi, Charan Singh, R Venkataramanan, VP Singh, Rajiv Gandhi, ND Tiwari, and Madhu Dandavate were all politicians with limited knowledge of economics, but who served as India’s Finance Ministers. We should call it the Rajiv era.

But we can’t find fault with any of them. It was the simplest of times after our Independence and that kind of knowledge was more than enough. Learning itself was not required, as leadership was enough. There were other unsung heroes willing to do the job in background.

But, unfortunately, both these simpler eras are over. Leaders unwilling to learn are not enough. Even leaders willing to learn are not enough. Because, complexity has grown exponentially.

Celebrated futurist Alvin Toffler predicted it correctly. “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. ”

If literates of 21st century should do this much, what should be expected of leaders?

As a nation, we have so much to unlearn and relearn. We have to unlearn habits like imported fuel, imported gold, overspending, fiscal indiscipline, corruption, un-productivity, inefficiency, unaccountability, and even, over-reliance on parliamentary democracy vis-à-vis newer forms like direct democracy.

It is noteworthy that Dr. Manmohan Singh admitted his ignorance in front of Dr. D Subbarao and Dr. Raghuram Rajan. Dr. Singh was rather appalled that the very report on monetary policy by Prof. Sukhamoy Chakravarty that he commissioned in 1982 is still being used by RBI as the primary document in setting monetary policy!

He also had two other advices for Dr. Rajan - ask smarter professionals around and build consensus. Looking from where he stands now, it is one lesson that Dr. Singh has painfully unlearned and relearned.

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