Bringing Wall Street flavour to Mint Street — insider vs outsider..

One gets curious while reading such pieces. It is fine to appreciate a positive development but one must really think through what is going on around the world.

Recently RBI set up 2 committees (first on monetary policy framework and second on providing financial services). The article says:

The composition of two new panels by the Reserve Bank of India signals governor Raghuram Rajan’s determination to consign the old school of thought to the dustbin, and a bigger role for intellectuals from financial markets in central banking than bureaucrats.

Officers from the finance ministry and public sector executives, who once used to dominate any committee set up by regulators, are nearly absent. International banks such as JPMorgan, Citigroup and Nomura appear bigger in the new scheme of things than a State Bank of India, or a joint secretary.

The panel on Comprehensive Financial Services for Small Businesses and Low-Income Households, headed by Nachiket Mor, and the Urjit Patel Committee to revise and strengthen monetary policy framework do not have a single bureaucrat who are renowned to throw rule books stalling decision making than letting new ideas flourish.

“I am guessing it reflects governor Rajan’s belief as reflected in several of his research studies and books that if you leave reforms in the hands of the insiders then all that happens is that outsiders get pushed away even farther, making the system less competitive and inefficient,” says Jahangir Aziz, Asia economist at JPMorgan Chase.

Pretty strong words like dustbin and all.

Now the article assumes two things —  one all the previous committees served by finmin officials and bureaucrats were just useless and two, it will be the outsiders (read experts) which will be behind these two reports.

Again not sure at all.

One, I am no fan of bureaucracy but we have some really talented individuals who come via this process. It is wrong to assume that the previous committees manned by these guys were  for self-interests.

Two, the committees may be manned by the bureaucrats but have mostly been headed  by so called experts. Infact, the real irritation is that most committees in India are headed by one or two prominent names who are asked to give a view on anything and everything under the sun. It is like a virtual monopoly of sorts with few people calling the shots.

Three, expanding on one. How do we determine insider vs outsider? The recent crisis was preceded by several suggestions from so called outsiders in wall street who gamed the system for self-gains. Who are the outsiders here? Those who are from the industry or those who do not have any stakes in the business.

Now, this does not mean I am questioning role of experts in committtees. It is just that we need to balance things. Bureaucrats who man or woman these committees are a committed lot who bring their wide experience on the topic. Indian experiences are very different with several contexts and views in place. These people enrich the whole exercise by bringing insights. Then many have qualification in economics from top univs and understand economics like no other.

The Anglo Saxon guys are looking at ways to minimise their influence. We however think differently and believe this kind of culture is useful.

This crisis is not about GDP etc declining. It is a bout the crisis in economic ideas which the western world has projected to the rest of the world….

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