RBI at Modi’s command? Amartya Sen questions federal system, calls demonetisation a “gigantic mistake”
Amartya Sen is not the one who goes shooting his mouth off about others’ business. Rather his thoughts are calculated and well defined.
That is also why one shouldn’t take him as just another person criticising prime minister Narendra Modi’s demonetisation policy, which suck out 86% of the country’s bank noted, aimed to kill black money corruption.
In fact, the Nobel laureate raised too many questions on the Modi’s governance and policy mechanisms, and the role of the Reserve Bank, which is India’s central banking institution that controls the monetary policy of the Indian rupee.
In an interview with a leading television channel Sen said, “Napolean after his failed attempt to raid Russia, on his way back, said that he actually did not want to do anything, just wanted to do a snowy excursion in the snowy mountains of Russia.”
Sen called Modi’s decision of demonetisation was a similar attempt — a decision that was taken by a small group of people around the prime minister (not even the central government), and definitely not by the RBI, which would have been ideal.
He called demonetisation a “gigantic mistake” as most of the currency in circulation was pulled out just to recover 6% of cash that was in the form of black money.
To that effect, Sen said Modi uses his magic to convince people, but demonetisation was his “Napolean moment”.
Modi did not consult the state governments, which poses a question on the country’s federal policy, and that the RBI was just following orders, and nothing more.
Not only Sen, former RBI governer Y.V. Reddy talked about the bank’s eroding autonomy.
Reddy also said that RBI is facing “reputational risk”. He said that over the years autonomy of the central bank has eroded and recent criticism from rating agencies will only be detrimental for the bank’s reputation.