Bimal Jalan

Born
Born in 1941
In 1941

Positions held

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
Education
Represented India on the boards
of IMF and World Bank

Education

Graduated at Calcutta and later

Books
studied at Cambridge and
Oxford University

India’s Economic Crisis

The Way Ahead, 1991

India’s Economic Policy:

Preparing for the 21st Century

India’s Economy in the New

Millennium

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Bimal Jalan : Introduction
The BJP government had reversed most
appointments of the erstwhile United Front
governments. 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 tension
at 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
Did You Know?
able to persuade the left or the right to follow the
most beneficial economic policies. He has not publicly
stated the details of his
doctorate which may be
from Bombay
Bimal Jalan : The RBI Governor
University. Though he
has studied from both
Cambridge and Oxford
Out of all the positions that he has held the most University his doctorate
notable has been that of the RBI Governor from is from neither
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 of
East Asian Crisis, the impact of which was
successfully managed by him.

A) He substantially strengthened the India’s

balance of payment position

B) Maintained a low inflation environment

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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 Did you know?

believed that financial crisis are directly related to During his tenure the
Rs 1000 note was
financial market liberalisation and better regulations
issued
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 of
At the time of his
foreign private capital to come into India
appointment as the
a) FDI b) Portfolio investment (through FIIs) Governor of the
Reserve Bank, Jalan
c) Bonds d) Bank lending.
was the Member-
During his time he issued Resurgent India Bonds in Secretary, Planning
which NRI’s and overseas corporate bodies with an Commission
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 He felt that the
and foreign reserves were the highest. international Financial
Architecture developed
at Bretton Woods is not
meant for the present
Major Policy Achievements era a new financial
architecture was
1. Though the measures he took were textbook needed to meet today’s
monetary techniques that had become outdated but realities
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 the

Governor i.e. November 21, 1997, the rupee had

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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 finance

minister 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 too
much 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 RBI’s
focus from over-emphasis on monetarism. When Dr
Jalan started his tenure, rupee was depreciating and
at the end of his tenure, he’s been criticized for
maintaining rupee very high, he’s 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 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.

Bimal Jalan Today

He has been the
He is the chairman of the committee in charge of Chairman of several
giving recommendations regarding the listing of highly recognized
stock exchanges. He has been criticized on this front institutions like Indian
for perpetuating the monopoly of the NSE. His report Statistical Institute,
seems to sound the death knell on cash starved Kolkota , Indra Gandhi
BSE. Stock exchanges including the regional stock Institute of
exchanges are of the opinion that they had Development Research,
Mumbai, National
undergone demutualisation in the hope that they
Council of Applied
will be allowed to list themselves on bourses but
Economic Research,
instead Bimal Jalan Committee suggests putting a
New Delhi and Institute
cap on the profits of exchanges which is backed by of Economic Growth,
the SEBI chairman Mr. C.B Bhave. What seems to be New Delhi
unacceptable now may prove to be beneficial
tomorrow as the man puts inclusive growth before
the interest of a few.

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Sources:
1. http://www.thehindubusinessline.com/2003/08/1
8/stories/2003081800230900.htm

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