The Hindu Business Line : When the Guv locked step with the Finance Minister

Mr Jaswant Singh's book `A Call to Honour' has drawn a lot of attention for the heat and dust that the `mole' raised. Of interest to bankers, though, should be a solitary reference to the RBI Governor, Dr Y.V. Reddy, in the index of Mr Singh's book, in page 357.

There, the context is innocuous. It is about a paper that the Guv sent to Mr Singh, who was then the Finance Minister. In that, Jean-Baptiste Say, a French economist, had been cited for his theory, `Supply creates its own demand.' (Say's Law it is called, though it is disputed that the author of the statement was Mr James Mill, father of Mr John Stuart Mill). Mr Singh reminisces how his mantra, of putting `more money in the housewife's purse and more food in the stomachs of the poor', also was anchored likewise on growth, and greater supply.

More dramatic, in comparison, is the narrative about Mr Singh's visit to Mumbai to address a meeting of a trade and industry federation. "Mr Reddy and I were walking down the stairs to the venue when I shared with him my fatigue at the tedium of having to repeatedly say the same thing week after week," writes Mr Singh in a chapter titled `Some afterwords'.

One reads that Mr Singh told Dr Reddy, `I want to do something different'.

What was the Guv's reaction?

"A lifetime's experience in economic management has instilled into Dr Reddy an admirable mix of careful consideration and quick decision-making," is how Mr Singh compliments the helmsman of monetary policy. "What do you want to do?" Dr Reddy asked Mr Singh. "I want to instil our industrialists with an abundance of self-confidence," writes Mr Singh.

It seems he wanted to tell corporate captains, "Go out, go and conquer the world, there is enough money, I will stand by you, support you, as will the Finance Ministry and the RBI and the Governor, Dr Reddy." Then?

"He stopped walking down the stairs."

Who? The Guv. He asked Mr Singh, "No limits?" And promptly came the reply: "Yes, no limits. Plus all help in borrowing here or abroad. I want to start the process of a reverse economic imperialism."

Governor Dr Reddy did not smile, remembers Mr Singh. "Remaining silent for some time, he then spoke softly, `Sir, go ahead and make your announcement.'"

But Mr Singh wanted more, this time for lay citizens. "Why should we push them into becoming money smugglers, by allocating meagre amounts when they go abroad?" wonders the then Minister, and proposes that the permissible amount be raised to $25,000 per visit, `for use just as the citizen wants'.

To this, however, Dr Reddy appears to have added a caveat, `Not per visit, per annum, Sir.'

Looking back, the author in Mr Singh is happy that `India's foreign exchange conservatism was re-written' - `in a few short minutes'. The policy shifts are examples of `unorthodox economic management' to develop `the animal spirits of a country' and raise the morale of enterprise, says Mr Singh. "That initiative, I now know has contributed so meaningfully to India's investments abroad that they are now a source of global envy," he declares.

A case of decision-making on the move, casual and fast, just as CEOs are believed to be doing on golf courses? Or, of the RBI locking step with the FM then, especially in the context of the current controversy over interest rate hikes requiring okay by the boards of public sector banks?

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