Cash Account

Financial ruminations over forty years.
In Greek mythology,a gadfly is a tormentor of cows. Socrates described himself as a gadfly,“to sting people and whip them into a fury,all in the service of truth”. Deena Khatkhate has had a distinguished career at IMF,World Bank,UN and two ADBs (Africa and Asia),apart from revamping (as managing editor) the prestigious journal World Development. Unfortunately,outside the policy circuit,particularly in financial sector,Khatkhate isn’t a name as familiar as it should be. That can’t be because he is in the US. Despite being based in Maryland,he keeps abreast of what’s happening in India and is also a prolific writer. In part,the relative non-recognition may be because he focuses usually on financial sector,perceived as esoteric and abstract. He has described himself as a gadfly and his non-specialist and popular writings were published last year as Ruminations of a Gadfly. That’s an apt nom de plume,because he does take on holy cows on logical grounds,not for the purpose of being contrarian. Unlike Ruminations,this volume is a collection of 27 professional and academic papers,spanning from 1964 through 2006. There is one short 1992 note on self-reliance that wasn’t published earlier. But it doesn’t quite belong in this volume and should have been included in the earlier collection.

Since some of these essays were written several years ago,there is the obvious question: do they remain relevant today? He writes,“In discussions on inflation targeting,its one important dimension is passed over. If stable prices are indispensable for raising growth and employment,what would be the consequences of an onset of deflation…. Though the sources of inflation in India are non-monetary such as changes in food output,marketed surplus,lax fiscal policies and so on….” “The inefficient banking system in India is also a consequence of the bureaucratisation of bank management. The creation of that bureaucratic monstrosity — the banking department of the Government of India — on the specious ground that the government being the owner has to micro-manage banks has done the greatest disservice to the financial services industry…. The first step that needs to be taken to reform the Reserve Bank is to give it back its lost pride.” These quotes should establish the argument for continued relevance. 

Understandably,eight of the essays are on money and finance and another eight on the international economy,meaning primarily the financial system. However,in seven essays on national economy,Khatkhate strays from what is perceived to be his core area of expertise and addresses issues like income distribution and growth. But the most refreshing are four essays on governance — profile of leadership in a developing society,intellectuals and Indian polity,restructuring the political process and Nehru and the Indian administration. These aren’t topics one normally associates Khatkhate with. Notwithstanding the excellent collection,there are two complaints. First,some of the essays are pegged to work by others. They aren’t quite stand-alone pieces. Should they have been included? And if they are,shouldn’t the annotation to the work by others be more extensive? Second,shouldn’t there be a good introduction that thematically unites all the essays and provides the background,including a possible answer to the first question? There is a “Prelude” that attempts to do this,but it is rather perfunctory. However,the book is an extremely good read.