REACH for a straitjacket description to fit Bimal Jalan, and you won't find any. He's a brilliant-academic-career bureaucrat who's a Calcutta Marwari, a community known solely for its business acumen. He has traditionally been referred to as an economist whose heart lay distinctively left of centre, but he makes a strong case against subsidies, state intervention, and a large public sector. He's an acknowledged Keynesian but propagates that there's no conceptually pure model or perfect set of policies to fix real-world problems. He belongs to the old regime where initiation values were 'swadeshi and self-reliance' and 'protection and public sector', but talks of open markets and unsustainability of resource-guzzling public enterprises.
Dr Bimal Jalan, professional economist, able administrator, liberal thinker, eminent author and gentleman, assumes office of the Reserve Bank of India (RBI) governor later this week. The RBI governorship has never been a tougher or more high-profile job than it is right now. The role of the Central bank is being debated and reshaped across the world; India's economy seems poised precariously between boom and doom; the country is heading towards the terrifying/exhilarating prospect of full convertibility of the rupee; banking sector reforms are moving from the phase of deregulation to the crucial stage of operational efficiency; and global currency markets are in the grip of some sort of unending seismic seizure.
The biodata is as impressive as they come. Educated at Calcutta's Presidency College (where he came under the influence of legendary professor Bhabatosh Dutta), Cambridge University and later Oxford, Jalan left a lucrative job at the World Bank to return to India as chief of economic staff at ICICI in 1970. Since then he has been chief economic adviser, banking secretary, finance secretary and chairman of the Economic Advisory Council. He has been executive director at the International Monetary Fund and is currently winding up his work as member-secretary, Planning Commission.
But Jalan was definitely not the odds-on favourite for the post. An Outlook-MODE poll of around 150 senior bankers conducted just a few days before the finance ministry announcement found that 53 per cent of the respondents thought finance secretary Montek Singh Ahluwalia would get the job. Only 11 per cent thought Jalan would. But the soft-spoken, always-gracious, always untucked-bush-shirted Jalan got the nod.
Can't keep a good man down? Well, Jalan has seen more ups and downs in his careers than most senior government officials, but the fact that every down has been followed by an up may be proof that in a lobbyists' world, quiet men can still get people to listen.
Jalan was banking secretary and economic adviser in the Rajiv Gandhi government, but quit after irreconcilable differences with the then minister of state for finance Janardhan Poojary over 'loan melas'. He came back to North Block as finance secretary when V.P. Singh became prime minister but was unceremoniously ousted by the Chandra Shekhar regime at the height of the Gulf War crisis.
SO Jalan decided to write, producing, first, India's Economic Crisis: The Way Ahead, and then, recently, India's Economic Policy: Preparing for the Twenty-first Century. The latter, one of the most lucid and lay-reader-accessible books to have been penned by an Indian economist, examines the policy choices for the country at the present juncture. One criticism of the book has been that every page exudes a sort of rosy off-kilter optimism. Jalan looks at the new global economic order as presenting enormous opportunities for India, which, if it can seize the day, can actually get rid of all its poverty in some years. Seriously.
But Jalan is serious. And damn those ex-friends who sneer behind his back about the IMF thought-police tinkering with his brain. Jalan, as he has candidly admitted many times, has moved beyond the confines of ideology. If ideas are what some people have, and ideologies are what have some people, Jalan has thrown in his lot with the former. He is singularly uninterested today in sterile debates on the superiority of liberalisation over government intervention or inconsistencies of public sector with socialist ideals. What needs to be focused on, he argues passionately, is the final objective: India must reduce inefficiency and waste in allocation of national resources. Only efficient economic growth can get rid of poverty. And take care of national sovereignty and security. And ensure a just and equitable society. So concentrate on policies which can achieve the economic goals, and leave that ideological jetsam at home.
And his Leftist leanings? Bimal Jalan is not defensive. He points to the worldwide consensus on development economics in the '50s and '60s. The values of swadeshi and indigenous industry for that generation were not just development economics but a political statement. But the world has changed since then in terms of trade patterns and investment relationships in favour of developing countries and economic thinking must evolve to reflect objective circumstances. "You don't wear the same clothes that you did as a teenager, you don't do the same things. Why then should your thinking not change?" he asks.
"He was remarkably clear-headed in his thinking," recalls Ranjit Chib, Jalan's fellow-student at Cambridge. "Along with contemporaries like Amartya Sen, Amit Bhaduri and Amiya Bagchi, the debate on matters of planning, foreign investment and role of state centred around issues of national sovereignty, a just and equitable society and so on." Others agree that clear-headedness and pragmatic adaptability are Jalan's strongest assets. "He is very dynamic, open-minded, able to take an objective view of the situation and is prepared to correct the assessment he might have earlier made of various aspects of the economy," says Dr Abid Hussain, former Planning Commission member and Indian ambassador to the US. "He is pragmatic and willing to learn," says economist Dr Ashok Desai who has known him for over 30 years.
According to Jalan, the two pillars of the old economic policy were protection and public sector. Both turned out to be made of clay, with domestic protection yielding a growth rate less than half of China or East Asia and public ownership instead of boosting investments pushing government budgets close to insolvency. Besides, the country scored poorly on the human development aspects: poverty, education, health. The lesson to be learnt from history then is that there may simply be no contradiction between the rate of growth of the economy and poverty reduction. The reconciliation between raising growth rate and helping the poorest of the poor can come through fiscal empowerment of the government. Jalan prescribes a two-fold strategy: a targeted growth of 7 to 8 per cent that will fetch revenues, and less reliance on debt.
For the latter, Jalan prescribes a mandatory constitutional limit on the government's capacity to borrow both from the market and the RBI, considering the unbridled tendency to spend and subsidise everything in the country's multiparty political dispensation. This is an issue which was also raised some months ago by the man he replaces at the central bank: Chakravarthy Rangarajan.
Friends believe that Jalan has the strong independent streak that characterises the best central bankers. "The most serious challenge before him is to turn RBI from the government's errand boy into an independent monetary institution. He has strong political support from Janata Dal stalwart V.P. Singh and is senior to the finance secretary which puts him in a very strong position vis-a-vis the finance ministry," says Desai. Of course, the RBI can do little without the commitment on the fiscal side which seems to be sadly lacking, but people who know Jalan lay great store by his ability to converge diverse opinions into a consensus. "He has an extraordinary knack for riding through the storm unscathed," says Madhu Dandavate with whom Jalan worked as secretary when the former was finance minister, and then at the Planning Commission. Dandavate recalls the Gulf War crisis when oil prices hit the roof—from $16 a barrel to $45 which necessitated the hard decision to levy a Gulf surcharge. Jalan convinced him to take opposition parties into confidence and go on TV to apprise people of the rationale of the levy. The next day every newspaper in the country termed the surcharge as unavoidable and inevitable.
Naturally, expectations are running high. One indication why: as he winds up business at the Planning Commission office in Delhi before moving to Mumbai, staffers and colleagues can't stop talking of how down-to-earth and persuasive he is without ever being offensive or aggressive in tone and how decisive and diplomatic. If these qualities can't swing it for the RBI governor, nothing can.
