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India sought probe into ex-RBI gov Rajan for helping ‘white man’ | Business and Economy News

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New Delhi, India – A year after the government led by Narendra Modi’s BJP came to power in 2014, the top finance ministry official accused the Reserve Bank of India of setting interest rates to benefit developed countries and sought a probe into its conduct, a trove of official documents obtained by The Reporters’ Collective reveals.

Finance secretary Rajiv Mehrishi, working under then-finance minister, the late Arun Jaitley, made the claim after the RBI opted to prioritise controlling rising prices over lowering interest rates, which would have made borrowing cheaper for businesses and citizens.

Although the government and the RBI having different views is not unusual, the revelations mark the first time a top government official has accused the RBI of working to benefit “the white man” in “developed countries” and sought an investigation into the “real purpose” behind the central bank’s decisions.

The documents, which were accessed by The Reporters’ Collective (TRC) under the Right to Information Act, are being made public for the first time as part of a three-part investigative series.

At the time in 2015, the RBI governor was Raghuram Rajan, an appointee of the previous, Congress-led government. The BJP government chose Urjit Patel as Rajan’s successor.

But the RBI didn’t cut the interest as sharply as the government wanted, even under Patel. So the finance ministry called a meeting with the bank’s newly set up monetary policy committee (MPC) to push it to cut interest rates, according to the documents. The unprecedented meeting fell through when committee members declined to attend, a development widely reported in 2017.

Ex-finance secretary Rajiv Mehrishi's file note of August 2015, accusing the RBI of aiding the developed world
Ex-finance secretary Rajiv Mehrishi’s file note of August 2015, accusing the RBI of aiding the developed world through its monetary policy and seeking a probe.

The attempt to influence the central bank came despite the Modi government having amended the Reserve Bank of India Act in 2016 to strengthen the firewall between the RBI’s primary function of controlling prices and the government’s political impulse to spur growth even at the cost of rising inflation.

The RBI’s then-governor Patel pushed back, wrote to the government saying it should stop trying to influence the RBI in order to preserve the “integrity and credibility” of the new monetary framework “in the public eye and our parliament”. Otherwise, the government would be in violation of the letter and spirit of the law that protected the RBI’s independence.

As disagreements piled up on this and other issues, Patel resigned on December 10, 2018, citing “personal reasons”. The government replaced him with Shaktikanta Das who, as a top finance ministry bureaucrat, had justified increasing the government’s influence in the RBI’s rate-setting function, official documents reveal.

Different roles

One of the RBI’s key roles is to control the amount of money and credit available in the economy through the interest rate at which it lends to banks – this is the central bank’s monetary policy function. Lower interest rates spur economic growth in the short term but can also lead to an increase in the prices of goods and services, or inflation. Untamed inflation erodes the value of money in the hands of citizens, particularly the poor, acting like a hidden tax that hits poorer and lower-income citizens more than the rich.

Monetary policy is typically kept independent of government control because politicians face the temptation to create more money and spend beyond their means on populist schemes and vanity projects. In the long run, excess spending by the government harms the economy.

Differing analyses of where inflation may be headed and how interest rates should be set often create tension between central banks and governments in many parts of the world, including India. But in New Delhi, the debate took an ugly turn when the Modi government came to power in May 2014 as India was witnessing one of the highest levels of inflation in the world.

Newly appointed finance minister Arun Jaitley announced that the government would establish a monetary policy regime that would focus on keeping inflation in check with transparency and accountability. This would be a departure from the existing system where the RBI governor alone set interest rates, without an inflation target at hand.

In February 2015, as a first step towards establishing an MPC, Mehrishi and then-RBI Governor Rajan signed an agreement outlining an inflation target for the first time. The central bank committed to bringing inflation down to 6 percent by January 2016 and 4 percent in subsequent years, with a goal of maintaining it within a range of 2 to 6 percent. If the RBI failed to meet the target, it would be required to send an explanation letter to the government.

‘Subsidised’ the rich abroad

In 2014, Rajan kept the repo rate – the rate at which the RBI lends to banks – unchanged at 8 percent due to inflationary concerns. As inflationary pressures eased in 2015, he started cutting the rate, bringing it down to 7.25 percent by June. But in the August 2015 meeting, he maintained the status quo.

The Modi government was not satisfied with the cuts, with Jaitley and chief economic adviser Arvind Subramanian often publicly criticising the RBI and complaining that borrowing costs were still too high.

Their public venting, however, was only a hint of the pressure being applied behind the scenes, documents show.

On August 6, 2015, two days after the RBI announced its latest rate decision, finance secretary Mehrishi wrote an internal note, asking for the interest rate to be cut sharply to 5.75 percent.

“I agree with neither the analysis nor the conclusion [of the Reserve Bank of India’s monetary policy committee] to keep interest rates higher by as much as 150 basis points [or 1.5 percentage points], if not more,” Mehrishi said in his note. “An incalculable damage has been done to the Indian economy and Indian growth prospects, by stunting credit, and therefore investment,” he added.

Mehrishi then accused the RBI of helping wealthy foreign businesses at the cost of Indian businesses and citizens, claiming the “only beneficiaries” of India’s high interest rates were developed countries.

“We have subsidised the rich and influential in the USA, Europe and Japan.”

In developed countries, interest rates are typically lower than in India, encouraging some investors to temporarily park their funds in the Indian financial system to mint profits from the higher interest.

“Under the cover of being ‘inflation hawks’, the real reason for keeping interest rates high in India – at the cost of credit flow, investment and growth – needs to be more deeply thought about, analysed and investigated,” Mehrishi said in his concluding remarks.

Finance minister Jaitley acknowledged Mehrishi’s note on the file and “desired a discussion”.

The MPC finally came into place in September 2016, days after Rajan moved back to the University of Chicago’s Booth School of Business to teach finance. He was replaced by Deputy Governor Urjit Patel who was also involved in the making of the new monetary framework.

A month later, when Patel chaired the first MPC, it cut the interest rate by 0.25 percentage points. In its November board meeting, the central bank led by Patel approved Modi’s decision to invalidate overnight most of the existing currency, the so-called demonetisation, in which 500 and 1,000 Indian rupee notes ceased to exist as legal tender.

Some economists accused Patel of letting Modi railroad the RBI into approving one of the biggest domestic economic disasters and denting the central bank’s autonomy. Rajan would later claim that the government had consulted the RBI during his tenure on demonetisation but never asked it for the nod.

Almost as if responding to the criticism of diluting its autonomy, the MPC adopted a tough stance in its next meeting in February 2017 when it changed the “monetary policy stance” from accommodative to neutral. That change in “stance”, which surprised analysts, was a signal to the financial markets that the MPC would no longer be open to rate cuts.

The central bank kept the rates unchanged in the subsequent meeting of the MPC in April 2017, while the government scrambled to resuscitate an economy hit by demonetisation.

Rising tensions

With Patel resisting government pressure, the finance ministry attempted to influence the RBI’s independent Monetary Policy Committee which sets the interest rates.

File note by then economic affairs secretary Shaktikanta Das, mentioning about the decision to call a meeting with the MPC
File note by then economic affairs secretary Shaktikanta Das, mentioning the decision to call a meeting with the MPC, following discussions with finance minister Arun Jaitley.

On April 10, 2017, Jaitley held a meeting with his economic affairs secretary Shaktikanta Das during which they decided that then-chief economic adviser Arvind Subramanian and then-principal economic advisor Sanjeev Sanyal would hold a meeting with the “three government-nominated members of MPC, followed by a discussion with RBI, prior to the MPC meetings,” documents show.

In a note on April 12, Das wrote, “The idea is to convey MOF’s [ministry of finance] analysis to the MPC members and RBI. The final decision will be theirs [RBI].”

The MPC comprises three members from within the RBI, including the governor, and three external experts appointed by the government. MPC decisions, which are supposed to be made independent of government influence, are based on a majority vote. In a tie, the governor has a casting vote.

Under the Modi government’s law establishing the MPC, the government is only allowed to present its views to the committee in writing. Government officials cannot meet with the committee or influence it by any other means.

Ignoring the law, on May 17, 2017, the finance ministry sent a letter to each of the MPC members stating that “with the approval of the Finance Minister, it has been decided to evolve an institutionalised framework under which the government may, from time to time, engage with the members of MPC to provide the government perspective on macroeconomic situation including economic growth and inflation”.

The MPC’s external members were summoned for a meeting chaired by Subramanian on June 1, 2017, days before the committee was scheduled to meet. A separate letter was written to Urjit Patel telling him about the finance ministry’s decision to hold a discussion with the RBI officials on the MPC at its headquarters in Mumbai.

Three days later, the finance ministry reversed course and said in a file note that the discussions would only be informal because of the “sensitivities involved”.

“A revised letter may be sent to the MPC…without mentioning that we would like to institute a mechanism for informal discussion with them,” the note said.

A new letter was issued to all the MPC members, which specified that the meeting to be chaired by the government’s chief economic adviser is only to “discuss the overall macroeconomic situation in the country and developments in the global economy.” Any direct reference to interest rates, the real purpose of the meeting, had now been left out.

Timeline of early days of India's monetary policy

 

The letter

On May 22, 2017, Patel wrote back to Jaitley opposing the meeting. He said the RBI was “surprised and dismayed by this development on two counts”, according to the documents reviewed by The Reporters’ Collective.

“Firstly, we have not discussed the matter with each other, although we have interacted several times in recent weeks on work matters; and second, it is addressed to and seeks to set up meetings with MPC members, and separately so with non-RBI and RBI members,” Patel said.

He stressed that the move “violates the letter and spirit of the amended RBI Act (to set up an independent committee for monetary policy) and tarnishes the constructive engagement since 2014 between RBI and the Ministry of Finance on issues relating to monetary policy”.

“In fact, communication with or from (the) government should be scrupulously avoided if the integrity and credibility of the monetary policy decision has to be preserved in the public eye and our Parliament,” Patel wrote, adding that investors will “likely” take a dim view of any direct intervention in monetary policy.

“Frankly, this is avoidable as we seek, in the national interest, to nurture institutions befitting a modern economy,” the ex-RBI governor said.

Patel reminded Jaitley of the clause that the federal government can convey its views only in writing to the MPC from time to time and said that any other structure for communication will violate the law.

“This clause (where the operating words are “writing to the MPC”) was, you may recollect, precisely formulated so that, in a departure from the past, informal and non-transparent “direction” by government officials on monetary policy is disallowed,” his letter said.

Al Jazeera sent a list of questions to the Ministry of Finance, the RBI, Rajiv Mehrishi, Raghuram Rajan and Urjit Patel. None of them responded.

Das’s parting words

File note by then economic affairs secretary Shaktikanta Das justifying the finance ministry's proposed meeting with the RBI's MPC
File note by then economic affairs secretary Shaktikanta Das justifying the finance ministry’s proposed meeting with the RBI’s MPC.

In the finance ministry’s final internal note on the matter, Das, the then-economic affairs secretary, wrote that an “interaction between (the) finance ministry and members of MPC cannot be interpreted as coming in the way of the RBI Act.”

“Ultimately, accountability about (the) functioning of the economy lies at the doorsteps of the government, particularly the finance ministry,” Das said in a note dated May 29, 2017, while giving the approval to send the finance ministry’s analysis of the economy to the MPC members in writing.

Das, toeing the government line, would become RBI governor one and a half years after his departure in May 2017 from the finance ministry. He was appointed barely 24 hours after Patel abruptly resigned in December 2018.

Part 2 of the investigative series will be out tomorrow.

Somesh Jha is a member of The Reporters’ Collective.



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Bolsonaro gov’t threatening Brazilian democracy, jurists tell UN | Elections News

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Legal experts urge UN special rapporteur to visit Brazil to report on president’s attacks on Brazilian judicial bodies.

Brazil’s democracy and the independence of its judiciary are under threat from the government of President Jair Bolsonaro, a group of lawyers and legal experts have said in a petition to the United Nations, as the country prepares for elections in October.

The group of 80 jurists and legal researchers on Wednesday appealed to the UN Special Rapporteur on the independence of judges and lawyers, Diego Garcia-Sayan, to visit Brazil and report on attacks on the Supreme Court and the Superior Electoral Court that oversees elections.

The courts face an unprecedented campaign of distrust and public threats to judges who decide against the government’s agenda, they said in their petition.

“Moreover, without any evidence, Bolsonaro publicly claims that the Brazilian electoral system can be and has been rigged, and has even claimed that the TSE judges are behind such alleged frauds,” the petition to the UN rapporteur read.

Facing a drop in popularity, Bolsonaro over the past several months has repeatedly claimed – without providing any evidence – that Brazil’s electronic voting system is vulnerable to fraud.

Critics and judicial experts have rejected his claims as baseless, accusing Bolsonaro of planning to use his fraud claims to contest the election results, similar to former United States President Donald Trump, whom Bolsonaro has emulated.

Earlier this month, the president said his party would seek an audit of the voting system before the election. He has also suggested that the armed forces, whose current and former members are employed throughout his government, should conduct their own parallel vote count.

On Wednesday, the president’s son, Senator Flavio Bolsonaro, said Brazil could face political instability if the electoral court did not provide more transparency about its voting system.

Meanwhile, Wednesday’s petition said that Bolsonaro uttered a series of direct threats to the Supreme Court in a speech to a crowd of thousands of supporters in September of last year.

“The Brazilian Judiciary is under siege. Judicial independence in Brazil is facing challenges that are unprecedented since democratization in the 1980s,” the letter said.

Bolsonaro is facing a stiff challenge in his re-election bid from former left-wing President Luiz Inacio Lula da Silva, who recently launched his presidential campaign and holds a clear lead over Bolsonaro, according to recent polls.



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HRW documents ‘apparent war crimes’ by Russian forces in Ukraine | Russia-Ukraine war News

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Leading US-based rights group says Russian forces had subjected civilians to summary executions, torture and other grave abuses in two regions.

A leading human rights watchdog has accused Russian troops of carrying out summary executions, torture and other grave abuses in two regions of Ukraine, as it published a report documenting further cases of “apparent war crimes” by the invading forces.

Human Rights Watch (HRW) in its report published on Wednesday documented 22 apparent summary executions, nine other unlawful killings, six possible enforced disappearances and seven cases of torture from late February through March.

Twenty-one civilians told HRW about unlawful confinement in inhuman and degrading conditions during the period the Russian forces controlled much of the Kyiv and Chernihiv regions, it said.

HRW called for the alleged abuses to be “impartially investigated and appropriately prosecuted”.

Kremlin spokesman Dmitry Peskov and Russia’s defence ministry did not immediately respond to the Reuters news agency requests for comment on the HRW report. Russia has denied targeting civilians or involvement in war crimes and has accused Ukraine of staging atrocities to smear its forces.

Asked more broadly about war crimes allegations against Russian forces in Ukraine, Peskov told Reuters, “We consider it impossible and unacceptable to throw such terms around.”

“Many of the cases that Ukraine is talking about are obvious fakes, and the most egregious ones are staged, as has been convincingly proved by our experts,” he said.

Global outrage

There was a global outrage dozens of bodies, some with their hands bound, were found in towns, including Bucha, near the Ukrainian capital after invading Russian troops retreated from the area.

HRW said it had visited a total of 17 villages and small towns in the Kyiv and Chernihiv regions and interviewed 65 people between April 10 and May 10, including former detainees, people who said they had survived torture, families of victims and other witnesses.

The report went further than a statement issued in April in which HRW said it had documented “several cases of Russian military forces committing laws-of-war violations” in Russian-controlled regions such as Chernihiv, Kharkiv and Kyiv.

“The numerous atrocities by Russian forces occupying parts of northeastern Ukraine early in the war are abhorrent, unlawful, and cruel,” said Giorgi Gogia, associate Europe and Central Asia director at Human Rights Watch. “These abuses against civilians are evident war crimes that should be promptly and impartially investigated and appropriately prosecuted.”

Russia calls its actions in Ukraine a “special military operation” aimed at weakening its southern neighbour’s military capabilities and capturing what it regards as dangerous nationalists.

A Kyiv district court on Wednesday began hearing its first war crimes trial against a Russian soldier who took part in Moscow’s February 24 invasion. The soldier, who is accused of murdering a 62-year-old civilian, told the court he pleaded guilty.

Ukraine has said it has identified more than 10,000 possible war crimes in total.





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Ex-Minneapolis police officer pleads guilty in George Floyd case | Black Lives Matter News

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By entering the plea, Thomas Lane avoided the more serious charge of aiding and abetting second-degree murder.

A former United States police officer has pleaded guilty to a state charge of aiding and abetting second-degree manslaughter in the killing of George Floyd, a Black man who died in 2020 when a fellow police officer knelt on his neck.

As part of the plea deal announced on Wednesday, Thomas Lane a former Minneapolis police officer will have a count of aiding and abetting second-degree unintentional murder dismissed. Lane, along with J Alexander Kueng and Tou Thao, has already been convicted on federal counts of willfully violating Floyd’s rights during the events that led to Floyd’s death.

The state is recommending a sentence for Lane of three years — which is below state sentencing guidelines — and has agreed to allow him to serve the time in a federal prison. He has not yet been sentenced in the federal case.

Floyd died May 25, 2020, after another officer, Derek Chauvin, who is white, pinned him to the ground with a knee on his neck, as Floyd repeatedly said he could not breathe. Lane and Kueng helped to restrain Floyd, who was handcuffed. Lane held down Floyd’s legs and Kueng knelt on Floyd’s back. Thao kept bystanders from intervening during the 9.5-minute restraint.

Attorney General Keith Ellison, whose office prosecuted the case, said he was pleased that Lane accepted responsibility for his role in Floyd’s death.

“My thoughts are once again with the victims, George Floyd and his family,” Ellison said in a tweet. “Floyd should still be with us. But I am pleased Thomas Lane has accepted responsibility for his role in Floyd’s death.”

In an earlier statement, he said the move was necessary towards achieving justice.

“His acknowledgement he did something wrong is an important step toward healing the wounds of the Floyd family, our community, and the nation,” Ellison said. “While accountability is not justice, this is a significant moment in this case and a necessary resolution on our continued journey to justice.”

The plea by Lane, who is white, comes during a week when the country is focused on the deaths of 10 Black people in Buffalo, New York, at the hands of an 18-year-old white man, who carried out the racist, livestreamed shooting Saturday in a supermarket.

Lane’s lawyer, Earl Gray, said he and Lane would have no comment. Lane was not taken into custody and a pre-sentence investigation was ordered. He is scheduled to be sentenced on September 21 on the state charge.

Police officers during George Floyd arrest
Thomas Lane was convicted in February along with two other former colleagues of federal charges, after a monthlong trial that focused on the officers’ training and the culture of the police department [File: Pool/Court TV via AP]

Lane was convicted along with Kueng and Thao of federal charges in February, after a month-long trial that focused on the officers’ training and the culture of the police department. All three were convicted of depriving Floyd of his right to medical care and Thao and Kueng were also convicted of failing to intervene to stop Chauvin during the killing, which was caught on video and sparked protests in Minneapolis and around the globe as part of a reckoning over racial injustice.

Chauvin, pleaded guilty last year to a federal charge of violating Floyd’s civil rights and faces a federal sentence ranging from 20 to 25 years. Earlier, he was convicted of state charges of murder and manslaughter and sentenced to 22.5 years in the state case.

After their federal conviction, there was a question as to whether the state trial would proceed. At an April hearing in state court, prosecutors revealed that they had offered plea deals to all three men, but they were rejected. At the time, Gray said it was hard for the defence to negotiate when the three still did not know what their federal sentences would be.

Thao’s lawyer, Robert Paule, was in the courtroom for Lane’s plea hearing. When asked if his client would also take a plea deal, he replied “No comment.”

Kueng, who is Black, and Thao, who is Hmong American, are scheduled to go to trial in June on the state charges.





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