Common Causes

Columnist, mentor, perfectionist and free speaker, SS Tarapore is a man of many parts who feels deeply for the common people. A career central banker, he retired as deputy governor, Reserve Bank of India (RBI) in 1996.

He worked closely with Dr C Rangarajan over a long period (1982-96) and assisted him during the crisis of 1990-91. Subsequently, he chaired a number of committees and boards which dealt with financial reforms. A believer in unswerving anti-inflationary monetary policy, he was labelled as rigid. Referring to his initials, he once quipped that he was ‘no-no Tarapore’ rather than ‘yeS yeS’ Tarapore to commercial bankers, with his refusal to pay them interest on cash reserve ratio (CRR).

Tarapore is probably the first economist to write a column syndicated in multiple languages. Common Voice has been in print since 1997, and books have followed. Long regarded as a monetary hawk, Tarapore is convinced that high inflation is a cruel tax inflicted on the poor. His advocacy of caution in policy to win the battle against inflation is persistent. In a recent column, he stated that with international uncertainties and the need to raise administered prices, the battle with inflation is nowhere close to being won.

His latest offering, Interpreting Financial Policies for the Common Person, is timely, since the voice of the aam aadmi has become a force to reckon with. The author makes economic and financial policies which impinge on the common people intelligible. He believes that people need to understand.

Part I of the book deals with a range of general issues. While appreciating the need to generate employment, the writer cautions against accelerating inflation. Part II, about monetary policy, raises the concern that overwhelming emphasis on growth results in unnaturally low interest rates. Tarapore emphasises that official price indices understate inflation and invariably, depositors get negative rates of return. He cautions that unless depositors are given a fair rate of return, they would move from financial savings to physical savings.

Part III is exclusively devoted to the savings bank interest rate, which was controlled till October 2011. Tarapore has been at the forefront of the advocates for freeing the rate, which was unfair to depositors. but the author regrets that when they were freed, banks cartelised. He believes that this is a fit case for the Competition Commission to examine.

Part IV covers regulatory issues which directly affect common people. Financial inclusion cannot be attained in a vacuum and other economic agents, particularly the government, must share the burden along with banks. He debunks the myth that financial inclusion requires low interest rates. In fact, the poor first encounter banks as depositors, and low interest rates repel them from the banking system.
Incidentally, the author has been a strong advocate of the need for humane treatment of the family of a deceased depositor, and he voices their distress.
Part V highlights the iniquity of the tax system wherein large incomes get exemptions from taxation (eg. on dividends) while relatively low incomes are subject to savage taxes. Moreover, senior citizens are short-changed as the tax system is insensitive to the life cycle of savings — they need to draw down their savings in their later years.

Part VI deals with external sector issues. Tarapore is an advocate of depreciation of the rupee, as an overvalued rupee favours big business over small and tiny industries. The author emerges as a gold buff in Part VII, where he argues that the public’s preference for gold has a strong logic and the strong anti-gold lobby in government and the RBI militates against the interests of common people.

This collection of thought-provoking articles should be of interest to bankers, bureaucrats, academicians, policymakers and above all the lay person whose cause the author has made his own. Here is an opportunity for those who need to decode government policies, and who need to evolve views on issues which are otherwise cloaked in mystifying economic jargon.

Dakshita Das is a civil servant. Views expressed are personal