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A New Lee Kuan Yew is Born in India: Govt Source

November 10, 2016 05:35 AM

COURSTEYNov 10 2016 : The Economic Times (Mumbai)
A New Lee Kuan Yew is Born in India: Govt Source
Ravish Tiwari
New Delhi:

MOVE SHARED WITH LIMITED NO. OF PEOPLE `Bombshell to recall currency notes of Rs 500 & Rs 1,000 first spelt out by Modi in March this year'
The bombshell to recall the currency notes of `500 and `1,000 was first spelt out by Prime Minister Narendra Modi in March this year, highly placed sources told ET on Wednesday.Given the sensitivity involved, the move was shared with “limited and identified“ number of people even as RBI witnessed leadership transition from Raghuram Rajan to Urjit Patel during this period.
The government assessment, a top official said, was that the situation will “stabilize“ by November 30. “ About 3.5 billion new currency notes need to be infused into the system. The government estimates that the situation will ease into a comfort zone by November 30.“ Since the information was shared on a need-to-know basis, Patel got to know about the move from the “system“ only after he was declared to take over as RBI governor. Top officials refused to pin point who told Patel -the Prime Minister, the Finance Minister, or the top officials of the finance ministry or PMO.

His predecessor Rajan and deputy governor R Gandhi, who heads currency man agement, were the only ones aware of the move before Patel was brought into the loop as RBI governor. Chief Economic Advisor Arvind Subramanian was not quite aware till the last day, added sources.

Taking a political call of an economic move of this magnitude, government insiders feel, has brought “new respect“ for the PM. A highly-placed government functionary even sought to equate him with Singapore's legend Lee Kuan Yew. “From making up his mind to rolling it out yesterday (Tuesday), a new Lee Kuan Yew is born in India. It will be reflected in the legacy of this Prime Minister,“ he said.

The source briefed about the details of exercise confided that “as happens with every new move, there was one side highlighting the enormity of risks involved in even a small slip up in this exercise“ while “the other side was enthusiastic to push it.“

The exercise, obviously , began with discussion between RBI governor Raghuram Rajan and Economic Affairs Secretary in March this year. Once a call was taken, the information was shared on a need-to-know basis with “limited and identified“ people to maintain the confidentiality of such a sensitive move.

It was as part of the confidentiality that formal procedure of Economic Affairs Secretary writing to RBI mooting the proposal and RBI convening the Board to pass a resolution to accept the proposal and communicating it back to the government was completed on Tuesday . It was after this process that Cabinet members were informed during the meeting on Tuesday evening. The formal procedure was completed in a day when a joint notification was issued to roll out the move.

As for the timing, sources said, the government was in a bind with limited choices as it could not have taken such a move before a series of festivals, which meant waiting until Diwali and Chhath. At the same time, it could not have delayed beyond the Parliament session as imposition of model code of conduct for poll-bound states would be imminent.Also, the government needed to get down to the budget preparation exercise while giving at least about 50 days window to settle down.“This was the latest we could have gone,“ said a government functionary .

A top official admitted that the government has entered into a “zone of the unknown from tomorrow (Thursday)

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