अज्ञेय के जन्मदिन पर|

आज अज्ञेय का जन्मदिन है। हिंदी के श्रेष्ठतम लघु-कविता लेखक की कुछ कवितायेँ जो मुझे बेहद पसंद हैं।

जो पुल बनाएंगे
अनिवार्यतः पीछे रह जाएंगे
सेनायें हो जाएंगी पर
मारे जायेंगे रावण
विजयी होंगे राम
जो निर्माता रहे,
इतिहास में बन्दर कहलायेंगे
मेरे अज्ञातवास की
अब कितनी अवधि शेष है प्रभु?
कहाँ है वो शमी का पेड़
जिसपर मैंने अपनी
जिजिविषा लटकाई थी?
रामायण और महाभारत के प्रसंगों का ऐसा अद्भुत, ऐसा ओरिजिनल (और रेडिकल) इंटरप्रेटेशन कम हीं पढ़ने को मिलता है!
तुम सभ्य हुए नहीं
नगर में बसना
भी तुम्हें नहीं आया!
एक बात पूछूँ–(उत्तर दोगे)?
तब कैसे सीखा
विष कहाँ पाया?
मालती की गंध
बोलेगी तुम अभी मत बोलना
कह गया है जो पपीहा
उस व्यथा की परत तुम मत खोलना|

Bankers as Development Professionals

Three years ago, I called Narendra Modi, Indira Gandhi with a Y-chromosome. His speech on 31st December supports my contention. Like Indira Gandhi, he is also leaning heavily on commercial banks to achieve his development goals. It is not necessarily a bad thing. Research does show that shows that forcing banks to open more branches in rural areas during Indira Gandhi’s time helped reduce poverty. Modi is leaning even more on Banks than Mrs. Gandhi did. However, I wonder if he realizes how much our Bank professionals resent the developmental work. They are not ready for this role. Their training, their sensibilities and the incentives and the work culture at the banks—nothing prepares them for the developmental role that is being thrust upon them.  Just like our power utilities dislike servicing farmers and the rural poor, banks too would be much happier if villages were left to NGOs and Mahajans.

This transformation in job description—from a commercial role to a developmental one—has some precedence. After India became independent, development administration replaced revenue collection and magistracy as the main job of district collectors. Many an ICS officer did not like this change. Others excelled at it. Our bank managers dislike their changing role even more than the ICS did. I can say so based on many conversations with bank managers who are close friends and family members. When I talk to them, I get a feeling that they have so much power to do good, but few of them are inspired to do so. They treat it as a nuisance, a burden. The little they do is out of coercion, not inspiration and it shows in their collective performance.

A lot has to change if banks have to do all that our government wants them to do. One of these changes is in the training bank officials receive at the beginning of their careers. How you are trained matters. I can say so from my own experience. I was 22 when I joined IRMA. IRMA was only one of the many management colleges I had applied for. Believe it or not the list even included NIFT. Two years at IRMA changed the way I think about what a professional can and should do. I would have been a very different person had I ended up at any other management college.  Irrespective of the career an IRMAN pursues, she or he thinks more keenly about poverty and development, sustainability and inclusiveness than your average educated Indian. IRMANS are more interested in these issues and less cynical about what professionals can do about them even when they are in other fields of work. It’s true that only interest or intent is not enough. Meaningful action is needed. Yet intentions also matter. Self-image is important. Young professionals joining public sector banks need IRMA like training—to take pride in their capacity and the growing opportunity to work not only as astute lenders and deposit mobilizers, but also as a cadre of development professionals.

On Demonetization: Things I learned from my friends who work in Government Banks

I talked to some of my friends who are in public sector banks. The news is not good.

1. RBI is still not able to print and circulate enough new notes. Further, for every ten box of new 2000 rupee notes (equals Rs. 200 crores), banks are getting only 1 box worth Rs. 5 crores only of 500 rupee notes.

2. PSU banks are getting nervous because there will be long queue of pensioners and salaried employees to collect their monthly payments from 1st of December. Banks are not in a position to pay them in cash. Not yet.

3. Entire banking system is busy managing and handling cash. All other business has slowed down or come to a halt. Deposit is growing rapidly, but credit growth has stalled. Beank officials do not have time to even assess loan applications.

4. Another thing that is keeping top management of PSU banks busy is the floating of new rules by government or RBI every few hours. Bank officials are having three-four video-conferences every day with RBI. Each comes with some new instructions and restrictions. About turns and what not.

5. In the morning, I wondered if those who do not have bank accounts have some way of exchanging their notes. Now, I know the answer: no, they do not. They have to open a new bank account. Banks have been asked to issue them a rupay card instantly after KYC.

6. One of my banker friends joked: there are more marriages happening in banks this time than in marriage halls. Government has imposed ridiculous requirements for those who want to withdraw money for weddings. But as always happens in such cases, the business of printing fake wedding cards is booming. And bank officials simply do not have time or cognitive capacity left to do check documents rigorously and ascertain their genuineness.

7. Big businessmen who employ a lot of people–formally or informally–are on a mission to have bank accounts opened for all their employees. Soon, Rs. 24,000 will magically appear in many of these accounts.

8. Do not be surprised if a lot of businesses suddenly reduce the receivables in their books.

9. Last and perhaps the least important bit. A couple of years ago, RBI had launched a drive to take old, soiled, torn notes out of circulation–with some success. This is no time to crib about currency’s vintage. Sab chalta hai; sab chalega. So, soiled notes are back in circulation again.

अजीब है जिंदगी! : गजानन माधव मुक्तिबोध (1917-1964)

आज मुक्तिबोध के ९९वीं जन्मतिथि है। वो हिंदी के सर्वश्रेष्ठ कवियों में से हैं। निराला और अज्ञेय के बाद शायद हिंदी कविता के सबसे बड़े कवि। उनकी कई कवितायें मुझे बहुत पसंद हैं। उनमे से हीं एक की कुछ चुनी हुई पंक्तियाँ!

मुझे भ्रम होता है कि प्रत्येक पत्थर में
चमकता हीरा है,
हर एक छाती में आत्मा अधीरा है
प्रत्येक सस्मित में विमल सदानीरा है,
मुझे भ्रम होता है कि प्रत्येक वाणी में
महाकाव्य पीडा है,
पलभर में मैं सबमें से गुजरना चाहता हूँ,
इस तरह खुद को ही दिए-दिए फिरता हूँ,
अजीब है जिंदगी!

“The Curse of Cash”

Turning more than 80 percent of your currency into ‘coupons with an expiry date’, overnight, is a huge policy experiment. The idea itself is not new. India tried something similar in 1978, but with bills of much higher value that accounted for a smaller share of total currency in circulation. Ken Rogoff, an economist at Harvard and a chess Grandmaster, has also recommended something similar for the US in his new book: The Curse of Cash. As in India, nearly 80 percent of the cash in circulation in the US is in 100-dollar bills. However, unlike India, hardly anyone uses $100 bills for legal transactions and the US economy is much less cash driven. Even then, Ken recommends not an overnight demonitization, but a slow phasing out of currency bills of high value.

The Indian experiment, therefore, is much bigger and more complex than what has been done in the past and what some economists are recommending for developed countries.

How should we think about the economics of this experiment?

I understand this demonitization as a one time tax or penalty on black money stored in high value bills. Unlike Ken Rogoff, our government does not consider high value bills a curse. It has already introduced new bills of even higher value.

What are the likely effects of retiring old 500 and 1000 rupee bills?

First, the rich, the corrupt, the criminals and the terrorists who have money stored in high value bills will suffer some losses. This gives us all great delight. The positive popular response to this action is driven mainly by the potential losses and inconvenience to the corrupt.

Second, our banks need capital infusion. A lot of idle money–black and white–will be back in circulation and Banks will benefit from it.

Third, tax authorities will have more information on people who have unaccounted incomes. This information can help increase tax collections in years to come.

Fourth, those running fake currency rackets, including terrorist organizations, will lose money. However, their losses may be temporary. They will figure out ways to copy the new 500/1000/2000 rupee bills too. The new bills use technology to make it harder to fake them, but Raj buddhi par chor buddhi bhaari. The chors will find a way again. They always do.

Now, the limitations of this policy and its downsides.

First, it is a attack on the corrupt, but not on corruption itself. People are driven more by expectations of the future than experience from the past. If so, they will not become more diligent in paying taxes or more hesitant in accepting bribes because of this one time tax. Gold, silver, bitcoins and other stores of value will replace 500 and 1000 rupee notes. The mode of corruption will change; the extent of it will not. If the government and the opposition are serious about corruption, they should begin by making it essential for political parties to declare their sources of income. AAP has done it. Other parties should do it too.


Second, turning old bills into coupons may be targeted at the rich and the corrupt, but the collateral loss of savings and income to the poor is likely to be high. 3 out of 4 villages do not have bank branches within 5 km radius. 90 percent of women do not have bank accounts. More than half of our adult population does not even know how to read or write. They have not been equipped to operate bank accounts. It will not be easy for the old, the women, the immobile, the residents of the remote areas and many others living on the margins of the society to exchange old bills with the new. All cash-intensive businesses–small and large–will also suffer at least temporary losses. There is a lot of research that shows that for many, a temporary loss of income may have long-term consequences. It is therefore, absolutely important that our government works hard to ensure that this disruption is short-lived. It will require special efforts.

On addressing the impact of phasing out high value bills on the poor people and people who do not have bank accounts, Ken Rogoff has this to say:

That’s one of the most important things to take into account. And so my proposal not only calls for leaving around the $10 bills, but in providing for financial inclusion by giving free debit accounts to low-income individuals. The Nordic countries have done this. A lot of countries have. It doesn’t cost much, but that’s something absolutely you have to pay attention to. 

Remember: he is talking about a country where the unbanked are a small minority. In India, they are the overwhelming majority. If thinking of this disadvantaged group while demonitizing is important in the US, it should be the most important consideration, when doing so in India.

My friends and my government do not agree. They believe that the homilies to bearing the pain for greater good of the country can substitute for real provisions for the poor, the women and other disadvantaged groups. My facebook wall may even convince you that it is OK to leave more than 700 million people of India dependent on the charity and the benevolence of the 100 million privileged ones. When was the last time it worked in India–the elite minority being nice and kind and considerate to the vast majority? I have heard of interest free loans, but I have not heard of free favor. There is always a cost to a favor even when it is not denominated in rupees and percentages. Leaving the underclass to the mercies of the elites is not a progressive or smart policy, not anywhere and certainly not in India.

Every experiment offers useful lessons. One lesson I draw from this big policy experiment is that we should work much harder to ensure universal access to formal financial channels in India. Jan Dhan Yojana (JDY) was a good start, but much more needs to be done. Most JD accounts are non-functioning right now. Some of them may even get used by the local leaders to channel their unaccounted money this time. We need institutions, incentives and technologies to achieve universal financial inclusion, lower cash-dependence and faster growth of the formal sector in our economy.