RBI's dilemma

Well articulated and presented. The demonetisation risk has not been properly assessed is a fact and therefore the risk management seen subsequent to the implementation of the scheme cannot also be said to be effective. This is what has been experienced by the economy and the people for the last few days.  There is absolutely no dispute on the faulty implementation . However, the task is huge and the RBI a well reputed organisation for its competence and professionalism in managing what ever tasks it undertakes has unfortunately let down this time for every one to criticize. The consequences of demonetisation  could have been assessed well and the risks could have been very well minimised if not eliminated altogether. The Introduction of Rs 2000 notes could have been very well  avoided or at best restricted to metropolitan centres and all other areas could have been flooded with small denomination notes. The outsourced works could have been well monitored and RBI could have relaxed some administrative measures for fast, smooth and equitable distribution of its available stocks of notes to reach as many people as possible without disturbing the banks normal functions of accepting deposits and lending. A little planning in the initial stages could have helped implementation of the demonetisation scheme a great success. A stitch in time saves nine is what is demonstrated. To what extent RBI's independence in handling such a huge exercise has been eroded is not made transparent as the Government's interference in RBI's functioning these days is too much and it has perhaps lost its strength and credibility to vent its views to the Government. The coordinated approach from the government and RBI without undermining RBI's own reputation and professionalism could have brought in better results. All said RBI will have its own reasoning for the lapses which need to be adequately captured and factored into while writing the History as and when attempted. It is an Institution which has faced criticism but has always been adjudged as one of the best Central bankers of the world.

Dr T V Gopalakrishnan

(This comment apperaed in Money Life against the article on Demon of demonetisation. on the 23rd of December)