Several users have shared a quote attributed to former RBI governor Raghuram Rajan, where he has claimed to have said that he was not consulted by the government before the demonetisation exercise launched on 8th November, 2016.
On examining the claims, BOOM found that the claim attributed to Rajan were paraphrased and misquoted from his past statements on the issue.
"I was RBI governor during the time of demonetisation. RBI was not asked to make a single decision on demonetisation", says the viral quote shared by several users on social media.
While this quote at face value does not exist, it is also false for two other reasons. First, Rajan was not the governor of the RBI at the time of demonetisation. His term as RBI governor ended in September 2016 due to the expiration of his three-year term, while demonetisation was announced by Prime Minister Narendra Modi on November 8, 2016. Urjit Patel succeeded Rajan as governor in the month of September 2016, and was heading RBI during the exercise. Patel served as RBI governor till he stepped down on December 12, 2018.
Second, the viral quote creates the impression that the RBI and Rajan were kept completely out of the loop. Rajan has publicly written and spoken that the RBI was consulted, but that he had opposed the measure then. However, he was not asked to make any decision on demonetisation during his tenure.
The graphic can be seen below. BOOM received the viral quote for verification on our WhatsApp tipline (7700906988).
The "@bole_bharat" stamp as given on a graphic is a Congress-inclined page, though BOOM could not locate this exact graphic on its timeline and it seems to have been deleted.
Further, this was also shared by actor Prakash Raj and Trinamool Congress leader Jawahar Sircar.
This graphic is viral given the context of the union government recently telling the Supreme Court that the demonetisation exercise was a well-considered decision, and that they had initiated conversation with the RBI six months before it was announced. "The withdrawal… of a significant portion of total currency value was a well-considered decision", the affadivit is reported saying.
On November 8, 2016, Prime Minister Narendra Modi in a televised address announced that all ₹500 and ₹1000 banknotes in cash with the public would cease to be considered as legal tender overnight, citing corruption and terrorism and even the promotion of digital payments. There were nearly 87% of such denominations in circulation at that time.
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Did the government consult the RBI under Rajan before demonetisation?
Rajan's book 'I Do What I Do' shows that he was asked to share his view on demonetisation in February 2016, seven months before it took place. He gave these views orally.
His book states that he said that there may be long term benefits, but the short term costs outweighed them, further saying that the objectives of demonetisation could have been better achieved through other means. The RBI went so far as to prepare a note upon asking, which outlined the potential costs and benefits, and making alternatives known, the preparation for demonetisation (should the government plan on going ahead), and what would happen if the preparation was inadequate.
The government then set up a committee on the issue, the deputy governor in charge of the currency attended them. According to the book, Rajan writes, "At no point during my term was the RBI asked to make a decision on demonetisation".
Rajan has also iterated these details in interviews with others. He answered a question on the issue in 2018 at a talk at Harvard's Kennedy School.
"Demonetisation, I think, was not a well-planned, well thought out, useful exercise and I told the government that when the idea was first mooted", he said, stating that it had a negative economic impact, as well as people found their way around it to undermine its goals. His comments can be seen below. But he did admit that he did inform the government.
He also said this in other interviews. In a Hindi interview with BBC Hindi, he said that while higher taxes were a visible plus, but an economic downturn and informal sector stress were immediate negatives. His interview and comments on communication with the government can be viewed below.
Rajan also told NDTV in a conversation that he was asked to share his opinion, and he said that it was a bad idea again adding that he shared the pros and cons.
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