Bimal Jalan

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Bimal Jalan

Born in 1941

Former Governor of Reserve

Bank of India (1997-2003)

Member of Parliament, Rajya

Sabha

Ex Finance Secretary

Ex Member Secretary, Planning

Commission

Ex Chief Economic Advisor to

govt.

Ex Chairman of Economic

Advisory Council to the Prime

Minister

Represented India on the boards

of IMF and World Bank

Education

Graduated at Calcutta and later

studied at Cambridge and

Oxford University

Indias Economic Crisis

The Way Ahead, 1991

Indias Economic Policy:

Preparing for the 21st Century

Indias Economy in the New

Millennium

Born In 1941

Positions held

Education

Books


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Bimal Jalan : Introduction

The BJP government had reversed most

appointments of the erstwhile United Frontgovernments. But they were forced to retain one

key appointment. No one dared touch the RBI

governor at the time. He is not known as the

political economist for nothing. He had successfully

battled and protected the Indian rupee from

depreciating and staved off the ill effects of the East

Asian Crisis. More were to come his way. US

sanctions after the nuclear test at Pokhran, Kargil

war, oil crisis, the Iraq war and the military tensionat the border with Pakistan were some of the trials

and tribulations of his time. He is known as the

Knight of January 14th for his handling of the rupee

depreciation. He served the second longest term by

any RBI governor. People from either side of the

political spectrum respected his views and he was

able to persuade the left or the right to follow the

most beneficial economic policies.

Bimal Jalan : The RBI Governor

Out of all the positions that he has held the most

notable has been that of the RBI Governor from

1997 2003. What is so special about his stint as a

Governor of the most prestigious financial body in

the country is that he joined the post at the time ofEast Asian Crisis, the impact of which was

successfully managed by him.

A) He substantially strengthened the Indias

balance of payment position

B) Maintained a low inflation environment

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Did You Know?

He has not publicly

stated the details of his

doctorate which may be

from Bombay

University. Though he

has studied from both

Cambridge and Oxford

University his doctorate

is from neither

Did You Know?

He has not publicly

stated the details of his

doctorate which may be

from Bombay

University. Though he

has studied from both

Cambridge and Oxford

University his doctorate

is from neither


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C) Promoting the wide-ranging reforms in the

financial sector

He came at a time when policymakers and

economists around the world were striving to find

methodologies to detect crisis in advance and save

their economy from the same. Bimal Jalan

believed that financial crisis are directly related to

financial market liberalisation and better regulations

should reduce the impact of these crisis if not

completely insulate.

He adopted a series of measures to increase the

capital flow in the country. There are 4 ways offoreign private capital to come into India

a) FDI b) Portfolio investment (through FIIs)

c) Bonds d) Bank lending.

During his time he issued Resurgent India Bonds inwhich NRIs and overseas corporate bodies with an

NRI interest could buy. This further increased the

capital flow into the country. At the time he left the

office, inflation was low, interest rates were lowest

and foreign reserves were the highest.

Major Policy Achievements

1. Though the measures he took were textbook

monetary techniques that had become outdated but

the perfection with which he implemented them had

revived the old system which was manifested on

14th January 1998 and thus he came to be known as

the The Knight of January 14 .

What happened on January, the 14th?

On the day Mr. Bimal Jalan took over as theGovernor i.e. November 21, 1997, the rupee had

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Did you know?

During his tenure the

Rs 1000 note was

issued

At the time of his

appointment as the

Governor of the

Reserve Bank, Jalan

was the Member-

Secretary, PlanningCommission

He felt that the

international Financial

Architecture developed

at Bretton Woods is not

meant for the present

era a new financial

architecture wasneeded to meet todays

realities


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dropped to 37.42 a dollar and before he could even

make an attempt to prevent the downfall, it touched a

low of Rs. 38.52.

1) The first step he took was to stabilize rupee

with almost $3 billion.

2) Then he increased CRR to 10%. Though there

was some respite but the Congress pulled down

the govt. And FIIs started dumping rupee.

Rupee hits 39.9 to a dollar.

3) He hiked the interest on overdue bills and

increased the import surcharge.

4) When the markets still plunged the rupee to 40

a dollar on January 14, 1998, Jalan increased

the bank rate and CRR. The 2% CRR hike

absorbed a liquidity of Rs. 2400 crores from the

banking system.

5) Bank rate hike of 2%, increase in repos choked

rupee in the interbank market.

Had the rupee fallen significantly FII confidence

could have fallen and companies with dollar

loans could have gone bankrupt.

2. The Budget of 1985, presented by the then financeminister VP Singh as a part of the Rajiv Gandhi

government, which was a base for the later day

liberalization of 1991 was mainly a brainchild of Dr

Bimal Jalan who was the finance secretary. He was

also the force behind the first survey to collect data

on black money sources conducted under Dr Shankar

Acharya.

3. Dr Jalan also played a major role in changing the

concept of fiscal deficit and showing the pitfalls of toomuch subsidization, over expenditure and

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unrestrained borrowing from the RBI. His

intervention was necessary to resolve the

disagreement between Mr V. P. Singh and Dr

Manmohan Singh over the size of the financial plan.

4. Dr Jalan, during his tenure was able to maintain

healthy forex reserves and resisted the liberalization

of the capital account, he was also able to shift RBIs

focus from over-emphasis on monetarism. When Dr

Jalan started his tenure, rupee was depreciating andat the end of his tenure, hes been criticized for

maintaining rupee very high, hes thus seen both

sides of the spectrum, and that he has been able to

handle both situations with panache is a tribute to

his financial acumen

Bimal Jalan Today

He is the chairman of the committee in charge of

giving recommendations regarding the listing ofstock exchanges. He has been criticized on this front

for perpetuating the monopoly of the NSE. His report

seems to sound the death knell on cash starved

BSE. Stock exchanges including the regional stock

exchanges are of the opinion that they had

undergone demutualisation in the hope that they

will be allowed to list themselves on bourses but

instead Bimal Jalan Committee suggests putting a

cap on the profits of exchanges which is backed bythe SEBI chairman Mr. C.B Bhave. What seems to be

unacceptable now may prove to be beneficial

tomorrow as the man puts inclusive growth before

the interest of a few.

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Did you know?

He had predicted that

India will remain

shielded from subprime

owing to its low

exposure to US

mortgage markets of

just Rs. 2 crores.

He has been the

Chairman of several

highly recognizedinstitutions like Indian

Statistical Institute,

Kolkota , Indra Gandhi

Institute of

Development Research,

Mumbai, National

Council of Applied

Economic Research,

New Delhi and Institute

of Economic Growth,New Delhi


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Sources:

1. http://www.thehindubusinessline.com/2003/08/1

8/stories/2003081800230900.htm

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Did you know?

He was also the director

(Economic Affairs) of

Commonwealth

Secretariat in London.


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2. http://indiaabroad.com/money/2003/aug/28rbi7.

htm

3. http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788

4. www.bimaljalan.com: Letters and speeches

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http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788http://www.ndtv.com/video/player/events/bimal-jalan-on-policy-matters/87788

Bimal Jalan

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