Patel rap: Story of the bittersweet relationship between govt, the RBI Guv

Business Standard, August 30, 2018

Urjit Patel, the 24th governor of the Reserve Bank of India, has had an interesting relationship with the Centre. Taking over from the suave Raghuram Rajan wasn’t easy, but being demonised for demonetisation would have felt much worse. A lot has been written about Patel’s subservience to the government on the immediate ban of Rs 500 and Rs 1,000 notes, which anecdotal evidence suggests, hurt the unorganised sector badly.

Two years down the line, Patel and the government have more of a give and take relationship. On matters like giving an interim dividend to the Centre, he seems to be on the same page as the government.

But he has had his moments. The RBI is quite willing to slug it out with the Centre on the issue of power sector companies being sent to the National Company Law Tribunal. He has taken a firm stand on the limited powers of the apex bank in the case of public sector banks. Recently, the RBI approached the government to remove its nominee from public sector banks (the move was promptly rejected by the government). And not to forget, the ‘nudge’ to Axis Bank on Shikha Sharma’s performance is quite a rare event.


What has been more interesting is the central bank’s consistent supply of data on demonetisation. Few will argue that in the initial stages it seemed totally clueless, and it appeared that the central government with its daily changes had almost taken it upon itself to run the show. There were fears that the autonomy of the central bank was at stake. But Patel has done what the RBI does best – give out credible data consistently, albeit one may argue, a bit late.

On Wednesday, the annual report said 99.4 per cent of the demonetised amount was deposited with banks. And this is the final number, well finally.

This steady data supply has ensured there is a continuous debate on demonetisation and its impact. Of course, the opposition has already called it a wasted and expensive exercise, and the government will be quick to throw up increased tax collection and taxpayers’ numbers. But the good thing is there is a debate, which it would seem, is largely due to the RBI’s regular deliverance.

One does not know, or for that matter may never know, whether Patel believed in demonetisation or not. But in times, when there is a lot of debatable data, whether it is on jobs or on the back-series Gross Domestic Product, this comes as a relief.

In January 2017, Patel had to run from an event in Gandhinagar – a rare sight for an RBI governor – after reporters chased him for quotes on demonetisation. Now, it can be said that he can ‘stand and deliver’ as well.

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