In the entire history of the Reserve Bank of India (RBI), there have been only two or three economists who rose to become Deputy Governors in charge of monetary policy. Savak Tarapore is one of them. His long and distinguished career at the RBI, including a stint at the International Monetary Fund in the late 1970s, culminated in his being appointed to DG in 1992. He was at the helm, or at least in the control room, during much of the tumult of those times. The emergency air-lift of gold as collateral, the steep devaluation of the rupee, interest rate deregulation, moving to market determined rates for government borrowing, the aftermath of the Harshad Mehta scam are all part of some of the battle scars he wears. He wears them lightly though, and he has always played a stolid and subdued, second fiddle role to many bosses. His sterling innings has been called a Gundappa Vishwanath role by RBI’s historian T CA Srinivasa Raghavan. Tarapore remained active even after retirement, heading two crucial committees on capital account convertibility and a member of the Technical Advisory Committee. He has been a prolific writer, columnist and commentator. However, his most distinguishing quality has been his concern for the aam aadmi ,the ordinary bank customer, the depositor or small borrower. This is best reflected in his unhesitatingly hawkish stand on inflation, or support for increasing the deposit rate, or campaign for a gold bank. Tarapore’s new book speaks directly to the common man. It is acompilation of 70 short articles, written over a three year period between 2006 and 2009, for a Gujarati newspaper. Its language is non-technical, free of jargon, completely free of ambivalence (the bane of many economists), and it contains practical advice too. Even though the writing was part of a fortnightly column, and hence necessarily topical, there is an Aesop’s Fables quality to the short chapters. Tarapore’s insight and opinion on many matters, both monetary and otherwise, are nicely supported by tidbits from history. For example, he reminds us that relations between RBI and North Block weren’t always adversarial. It was Pranab Mukherjee who brilliantly defended the RBI governor in Parliament in 1982. Tarapore writes, “The proceedings of the debate should be mandatory reading for all who have interest in monetary policy. Following 1996, there is breakdown in the bonhomie between RBI and the North Block.” His defence of RBI against what he calls “illinformed attacks” might sound partisan, but is well substantiated. In fact, he has himself been a severe critic of the RBI’s less than proactive treatment of inflation control. The writings from 2008 warn about impending crisis, and are testimony to Tarapore’s prescience and understanding. He wrote in January 2008, that subprime crisis was more serious than portrayed then, and he warns that “there are large non-performing assets in the Indian financial system, which no one is keen to acknowledge.” Similarly, almost five years ago in 2006 he warned about the excesses of the micro-finance institutions, and possible human rights abuses, in coercive recoveries. It was only after micro-loan related suicides in 2010 that Andhra Pradesh passed a harsh ordinance that has paralysed the entire industry. If only the bad apples had been isolated in 2006, we wouldn’t have had the Black Swan of microfinance today. One of the most abiding themes in the book is Tarapore’s canvassing of the common man’s predicament. He writes in Chapter 9, “It is unconscionable not to raise the savings bank deposit rate”. The suppressing and nonderegulation of the savings rate continues to be a cruel joke on small depositors. Tarapore was instrumental in setting up the watchdog body for banking services. Here, too, he laments that despite introduction of no frills accounts, the customers are at the mercy of banks. He says, “The sad fact is that most customers are afraid to complain”. The procedures for “Know your customer” (KYC) have become a licence to kill the customer! (He has an interesting anecdote about mutual funds too). The book is divided into eight parts, with the first three focused on monetary and fiscal policy, the next on the small saver, followed by two on macro issues, a special section on gold and a last section on general policy issues. There is an interesting chapter on India’s pulses problem, which today is spoken of as the protein inflation problem by RBI. The beauty of Tarapore’s book is that it is possible to read the book non-sequentially or only one section at a time. The non-technical and light treatment masks much deeper understanding and passion for larger policy issues. It stands as adouble ton in ‘Gundappa Vishwanath’s’ career.
FINANCIAL POLICIES AND EVERYDAY LIFE (THE INDIAN CONTEXT) - Book Review by Ajit Ranade
