SELECT PRESS COMMENTS ON DEMITTING OFFICE AS GOVERNOR, RBI

The building blocks to Dr Jalan’s successful reign in the RBI go back to the early 1970s when Dr Jalan successively gave up lucrative jobs at a very young age to respond to the calling of public service. The only trouble with Dr Jalan was that he attained almost everything at an amazing pace so that inevitably there have been fewer and fewer peaks left.

The large number of achievements during his tenure as governor, RBI: The external sector management, the control of inflation, the strengthening of the banking system, internal debt management, regulation and supervision, currency management and internal reforms on HRD were all handled with sagacity, élan and style.

The greatness of Dr Jalan was that he was ever willing to engage in dialogue with dissenters and he pro-actively offered them a platform to air their views. With his inimitable erudition, he would demolish the arguments of critics.

Pragmatism has been his watchword and he was never a slave to purist analysis and policy. Dr Jalan's approach was that when orthodoxy does not work, the right response is to do something unorthodox.

One is convinced that the Jalan years will be known as the Golden Era of RBI.

Taking over in November 1997 at the height of the Asian financial crisis, Jalan saw through the troubles in a way that the economy was scarcely hurt. And through all the successive problems - US sanctions, Kargil war, oil crisis, the US invasion of Iraq, and the Damocles' sword of a war with Pakistan - Jalan's crisis management skills have never been in doubt.

As a farewell gift, S&P's has upgraded Indian banks' rating to stable. The encomiums from international financial circles had come much before - that includes a recent IMF study of exchange management in 40 countries, which puts India at the forefront.

Perhaps Jalan's greatest achievement was his seamless transition over two opposing regimes - the United Front and the NDA. Surely there were many frictions emerging for Jalan, a known non-aligned but they were all adroitly handled. So much so that this progeny of Gandhi's staunch followers finds himself the favourite candidate for a cabinet berth in a BJP government.

Truly a "political" economist, Dr. Bimal Jalan is no ideologue or a prisoner of dogma. He is a thinking man’s economist, a pragmatist. A successful practitioner of central banking profiled.

There are the usual bread and butter concerns for every central banker, but Dr. Jalan has more. He worries about governance and institutions. "People worry too much about policies, not enough about institutions and governance issues," he has repeatedly said in recent months. Economic reform is not just about changing rules and regulations and about getting prices right, but it is about transparency, good governance, and efficient institutions.

- Financial Express, August 18, 2003

It would certainly not be an exaggeration to say that the basic blueprint of liberalization, which appeared in former Prime Minister Rajiv Gandhi's maiden budget - presented by his Finance Minister V.P.Singh in 1985 -- owes its existence to the nimble mind of Dr. Jalan.

Not many would know either that the former central banker was the author of the long-term fiscal policy. The definitive document has redefined the very concepts like fiscal deficit and set goals for eliminating subsidies and government's non-plan expenditure. His ideas did not remain just on paper. His persuasive skills were successful in convincing several prime ministers and finance ministers to think like economists even while donning a politician's cap...

Meanwhile, Dr Jalan is surely expected to have a fruitful tenure at the Rajya Sabha. His intellect and erudition will greatly benefit the parliament and, perhaps influence our lawmakers to grasp the intricacies of economics. However, with the respect to the House of Elders, Dr Bimal Jalan is certainly cut out for a much greater role.

As one looks back at Dr Jalan’s regime at RBI, the most striking facet is the total demystification of the credit policy. Dr Jalan spoke like everyman. It was tough to interpret.

Under the stewardship of Dr Jalan, much has been done to rectify issues laying siege to lower transaction costs, but the reality is it has become high-decibel only over the last one-and-half years or so with the central bank asking banks to get transparent on the pricing front.

Bankers are also unanimous in the fact that under Dr Jalan, "Fortress" RBI has warmed up to the outside world like never before: it is no more the Kremlin it was perceived to be earlier. "It’s a pleasure to talk to the RBI officials these days - they are so understanding and eager to help. Things have changed dramatically," says the India head of a major foreign bank.

It is tough to sum up seven years in a few paragraphs. But the essence of Dr Jalan’s tenure at RBI is his ability to bring in sweeping reforms without much of a noise. A sort of seamlessness in the changes, not tectonic shifts.

The first Budget of Rajiv Gandhi-V.P.Singh in 1985 owed a great deal to Dr Jalan’s basic reformist instinct in favour of liberalization of India’s quota licence raj. He knew that the State had a distinct role to play, but within limits. A no less significant role that Dr Bimal Jalan played in those years was the initiation of the long-term fiscal policy….

It is a reflection of the change in times that Dr Jalan came in at a juncture when the rupee was falling and under threat and his best efforts were directed towards preventing the rupee from crashing. Today, if at all he is criticized by some, it is for keeping the rupee too high.

Dr Jalan should also be credited with effecting a substantive change in the RBI’s stance on monetarism. He has successfully rid the bank of its ideological shackles on the role of monetarism as a main guiding principle….

He is a truly "political" economist in the right sense of the term. No ideologue, he, is not a prisoner of dogma. He is a thinking man’s economist, a pragmatist.

S. Venkitaramanan, The Hindu Business Line, August 18, 2003

Dr. Jalan has smoothly fitted into the role of the governor, and has guided the RBI with a deft touch. Under his stewardship, the rupee gently depreciated from Rs.38.14 in end January 1998 to Rs.48.87 by July 2002 - this despite an increase in India’s foreign currency reserves from $ 27.6 bn to $ 59.5 bn over the same period. Banks have had to comply with more stringent capital adequacy and income recognition norms. The interest rate has come down by over 5 percentage points. A slew of exchange controls have been lifted and India has far greater capital account convertibility than earlier. And, despite the supervisory problems with cooperative banks highlighted by the failure of Madhavpura, the RBI has come out as a far stronger institution than ever before.

A record level of foreign exchange reserves, a low rate of inflation, lowest ever interest rates, a stable exchange rate and a money supply well within target. What more can the chief of any central bank want to leave as a legacy? In one word, nothing. No wonder then, Bimal Jalan says that he is leaving at the right time! The monetary scenario couldn’t have been better.

So, is this what Jalan should be remembered for. Perhaps not... Jalan should be remembered for what he did when he came in rather than what he leaves behind. He fought and decisively won a battle barely a couple of months after he took over. And like all, great generals, he took over. And like all, great generals, he will be remembered for his battle on the exchange rate front. Indeed, the seeds of his success in overall monetary management were sown in January, 1998. To be precise, on 14th January 1998.

For over fifty years, India suffered a foreign exchange constraint that bedeviled all economic discussions, but finally at the end of one more crisis in Balance of Payments, Manmohan Singh initiated a change by abandoning the exchange rate.

Jalan has now consolidated that reform by ensuring such a build up of reserves that for the first time a relevant public official is able to say "the fragility of the balance of payments is no longer a concern of policy makers."

On capital account convertibility, therefore, it should be said that for all intents and purposes Jalan has gone much further than campaigners for convertibility had anticipated. The rupee is as good as fully convertible…..

- Sudhir Mulji, Business Standard, August 28, 2003

Demystifying makes for transparency, in turn leading to accountability and responsibility. If more people understand the nuances of, say, exchange rates or interest rate policy, there will be substantial gains to public policy itself. It will make for more informed decision making.

Dr. Jalan says that any opinion on economic or public policy not readily understood is of no use. Economic policy written by academics for experts is all right but public policy will be better off if opinions are understood.

Jalan is not a man anchored in any particular ideology. He is practical in his approach to issues and crises. You could say he is more focused on the ends, not the means.

Jalan is a political economist in the best sense of the term. He is deeply conscious that public policy affects different sections of society differently. Jalan often talks about his intellectual debt to Mancur Olson, the Swedish institutional economist who did pioneering work on how political and social coalitions impinge on government policy.

- Businessworld, August 18, 2003