INDIA'S DECADE OF REFORMS

 India’s Decade of Reforms by Shri.M.G.Warrier ; Published by Norton Press; Pages 242 ; Price Rs 399/-

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Two “Gates”—the Nirav  Modi Gate and the Vikram Kothari  Gate--have opened up the floodgates of loss of confidence in our Banking system. Banks have been taken for a ride and bankers are being led by their noses !. In this atmosphere of distrust  and waning  confidence in the system  one welcomes a book which infuses in us faith and clears our mind of aberrations.

The author of the book under review, Shri.M.G.Warrier had a distinguished service of over thirty five years in the RBI and was the General Manager when he laid down office. He has a clear grasp of the diverse functions of the country’s Central Bank. Retirement from RBI saw him plunge into the world of economic journalism. He has won acclaim for his perceptive articles in “The Global Analyst”, Business Line and other journals. He is the author of a  book “Banking Reforms & Corruption ”, which won acclaim from the banking community. Warrier has a penchant for taking  the readers on a high-jet  flight to terrains high and low.

Warrier’s writings have become noted for profundity of  thought, clarity of expression and total conviction. What was written about J.M.Keynes in the introduction to Cambridge Economic Handbooks is applicable in full measure to Warrier. “Keynes had the uncanny knack of striking at the root of any problem, ability to remove the needless appendages and present the quintessence of any problem.”

Warrier’s second book --- “India’s Decade of Reforms”   is a reflection of the debate on the current economic state and the role of bankers, economists and policy makers. His views on our economy are pragmatic and loaded with wisdom acquired during his experience gained from RBI and his wide reading and deep thinking.

 The introductory section captures succinctly the evolution of R B I  from the halcyon days of the Hilton—Young Commission  Report on the Indian Exchange Currency system. Warrier  deftly covers the formative years of the Central Bank, the passing of the R B I Act, the commencement of operations of the fledgling Bank followed by the developments during the following eight decades of  RBI’s history.

One chapter is dedicated to the R B I’s role in economic development. It analyses how harmony is ensured in the handling of inflation and growth by R B I and the Central Government. Warrier urges the Government to extend a fiscal policy support to the initiatives of R B I. Inflation control is absolutely essential to ensure stability in the cost of living. Shri Warrier is satisfied with  the harmony in functioning of  GOI and RBI on important  issues like Indian Economy and Financial Sector Reforms. He has cited various examples to confirm this---such as constitution  of Banks Board Bureau, Merger of SBI-Associate Banks, Management of Stressed Bank Assets and  a signal to the State Governments that write off of agricultural loans would be funded by them only.

Two chapters are devoted to an analysis of monetary policy. R B I’s autonomy or independence of the monetary authority within the contours of government policy is not an issue just affecting those at the helm of R B I. The stability of India’s financial sector and the country’s image  outside are dependent on that. Warrier has strong views on the FSLRC. The Chairman finalised the report ignoring the views of K.J.Udeshi, P.J.Nayak and Y.H.Malegam. The FSLRC was not allowed “ to apply its intelligent mind “ and sadly it forgot its own original brief.

The section “Note-Ban and after” deals with the much more complicated Demonetization and its after effects. Shri Warrier has made a thorough  study of all aspects of this drastic measure  and throws a flood of light on the miasma enveloping the country soon  after Demonetization. The phrase “ making a mammoth tragedy” employed  by Dr. Manmohan Singh reflected his “resentment with the management of economy and financial sector in India for decades now”.

 Warrier is of the firm view that  the  “Indian banking system is robust enough to meet the current challenges and depositors’ savings are safe, secure and will remain so.”

Warrier writes in detail on Bank's mergers, consolidation and restructuring. According to him  “Interesting times are ahead for the banking sector in India. It has to change a lot in terms of skill, efficiency and penetration if it has to maintain at least the level of efficiency the sector displayed during the ‘Lead Bank Scheme’ days.

Warrier has pointed out that   HR related problems cry for solutions—and  these are  inability to hire   experts at market related compensation,   resistance  of employees to change and emphasis by  trade unions on  job security concerns. He strongly commends  the need for  integration of  Cost to Company principles with existing recruitment, training, placement and career progression policies .

The  other Sections contain good articles on a number of topics—Gold Management in India, Universal Basic Income, Agricultural Income Tax, Farm Loan Waiver ,National Pension System and Role of Auditors.

In the chapter on "Tourism-Under exploited potential",  Warrier explains the need to ensure an eco-system which will irresistibly entice tourists. We have to ensure basic facilities are made available for tourists. India has not even exploited 10% of its potential in tourism industry  The  Kerala Model for improving tourism is worth emulating in other States too.

Warrier has made certain critical and frank observations in the chapter on  "Dr Raghuram Rajan's contribution" .Dr Rajan evaded responsibility to getting himself involved in preparing RBI adequately to implement "Note Ban", being a mute spectator when the entire surplus of RBI was transferred to GOI  leading to substantial erosion of reserves to total assets from 12% in 2009 to all time low of 7.5% in 2016.

However, according to Warrier  Rajan sorted out some of the long pending relationship issues between GOI and RBI and also expedited banking sector  reforms for which he deserves praise.

An aside. Warrier’s  admiration for  Dr.Raghuram Rajan is total. Like Bertram Wooster in P.​ G .​Wodehouse novels “ He worships the very ground his lover walks on!”. Admiration and awe for Rajan has swept Warrier like a Tsunami !

 According to Warrier , Universal Basic Income (UBI)  should not be treated as a means of  "unemployment dole" or  an add- on to rather than replacement of current anti poverty and social programmes. In  Kerala the local population has eliminated poverty and improved human development indicators.

Warrier has suggested mainstreaming of idle currency and also to take measures to to ensure that all  gold and property transactions are routed through the banks.

The chapter on  Management of Stressed Bank Assets deserves special consideration in view of  RBI's policy of  tightening its rules around bank loan defaults, seeking to push more large loan defaulters toward bankruptcy courts and abolishing half a dozen existing loan-restructuring mechanisms, in its latest bid to accelerate resolution of the bad loans problem at Indian banks.

This book has come at the right moment and it is very helpful for those dealing with policy, practising bankers, students of management, banking and economics .

P.P.Ramachandran.

25/02/2018.