Echoing former RBI Governor Y.V. Reddy, former Union Finance Minister P. Chidambaram said on Saturday that demonetisation move put the central bank’s reputation at great risk and dubbed the whole process a “command performance”.
He also dubbed the demonetisation as a “terrible decision that was terribly implemented”.
Asked whether the Reserve Bank of India (RBI) autonomy was over or not, the former Union Minister said: “On this issue, the answer is yes.”
“Reversing the sequence stipulated in the Act… instead of the Reserve Bank recommending withdrawal of legal tender status for the (high-denomination) currency, the government recommended to the bank that the legal tender status should be taken away.”
Recalling the build-up to the November 8 demonetisation announced by Prime Minister Narendra Modi, the senior Congress leader said: “That was on November 7 when the RBI Board (meeting) was called. Was there a written notice? They will not tell us.”
“How many people attended? They will not tell us. Was there an agenda paper for the meeting? Were there minutes of the meeting? They will not tell us. How long the meeting lasted? They will not tell us,” he said.
“I have information that the meeting lasted 30 minutes and the recommendations were made to the government. The Cabinet was waiting for the recommendations,” he claimed.
“How could the Cabinet know that the RBI will recommend the withdrawal of legal tender status? It was a command performance,” he said.
Echoing Reddy, Chidambaram said: “And to that extent, in this instance, the Reserve Bank’s reputation has been put at a great risk, the point which (ex) Governor Reddy made.”
The senior Congress leader said he would have resigned if demonetisation was implemented during his term as Finance Minister.
“In the last 50 years, no major economy has demonetised its currency. India has been added to the list that includes Zimbabwe, North Korea and Libya,” Chidambaram said, adding that demonetisation was a “terrible decision that was terribly implemented”.
Taking a swipe at Modi, he said: “My real grievance on demonetisation is that the decision of this magnitude with enormous consequences cannot be taken, or is not to be taken, by one person.”
Chidambaram said three important official of the Finance Ministry — the Finance Secretary, Banking Secretary and the Chief Economic Adviser — should be involved in the (any proposed) demonetisation and they should be in the forefront in telling about and defending the scrapping of currency.
He said none of them had spoken a work in the last 70 days.
“What it means is that the three most important officials of the Finance Ministry concerned were not consulted; if they were consulted, they disagreed,” he added.
Chidambaram said former RBI Governor Raghuram Rajan opposed demonetisation and formally put his view on the issue in a five-page note to the Prime Minister’s Office.
“In retrospect, I suspect one of the reasons why his term was not extended was that the government was in a hurry to demonetise,” he said.
“That is why 64 days after the new Governor (Urjit Patel) assumed office, we have demonetisation,” he added.a