Was RBI Led By Raghuram Rajan Consulted Before Demonetisation? Check The Facts Here

A quote allegedly attributed to former Reserve Bank of India Governor Raghuram Rajan is being circulated across social media. The quote is viral with Rajan's claim that the government did not consult him before the demonetisation exercise was executed on 8th November 2016.

The quote attributed to Rajan is going viral just weeks after six years since demonetisation was marked on November 8, 2022. On November 8, 2016, Prime Minister Modi suddenly announced demonetisation with the decision to withdraw banknotes of Rs 500 and Rs 1000.

Claim:

The viral image contains two quotes with images of Prime Minister Narendra Modi and the former Reserve Bank of India Governor Raghuram Rajan. The first image connected to PM Modi reads, "We did Demonetisation after extensive consultation with the Reserve Bank of India." The second image connected to Rajan reads, "I was RBI governor during the time of Demonetisation. RBI was not asked to make a single decision on demonetisation."

Rajya Sabha MP Jawhar Sircar circulated the claim in a Tweet with the caption, "Who's saying the truth? Only files and records will reveal."

Actor and politician Prakash Raj shared the image with the claim, "Dear Citizens …Who is telling the TRUTH."

The image is viral across Twitter with the same claim.

Fact Check:

The Logical Indian fact check team verified the viral claim and found it to be false. Raghuram Rajan had been in talks with the Centre regarding demonetisation but didn't agree to it.

We conducted a keyword search with the keywords, 'Raghuram Rajan' and 'demonetisation' and came across a report published by Hindustan Times on September 5, 2017.

The Hindustan Times report was regarding the former RBI governor's views presented on demonetisation in his memoir, 'I Do What I Do'. The report quotes Rajan as saying that during his tenure as the RBI governor, the RBI was not asked to make a decision on demonetisation.

As per the report, Rajan was asked by the government in February 2016 to provide his views on demonetisation. "Although there might be long-term benefits, I felt the likely short-term economic costs would outweigh them," he is quoted as saying.

We then went through Rajan's book to verify whether the statements was made or not.

Rajan further notes in his memoir regarding a note that the RBI was asked to prepare on demonetisation. As per the memoir, the note outlined the potential benefits and costs of demonetization, and also provided alternatives that could lead to similar aims.

"If the government, on weighing the pros and cons, still decided to go ahead with demonetization, the note outlined the preparation that would be needed, and the time that preparation would take. The RBI flagged what would happen if preparation was inadequate."

We also came across this article by The Hindu published on December 1, 2021. The article quotes Raghuram Rajan as saying that he had referred to demonetisation as "not a good idea", when asked by the government. As per the Hindu report, he is quoted as saying that demonetisation's implementation was "not well-planned".

The Hindu article also adds that Rajan rejected the claim that the RBI was not consulted by the government before proceeding with demonetisation. "I didn't ever say that I wasn't consulted [on demonetisation]. In fact, I have made it quite clear that we were consulted and we didn't think it was a good idea," he's quoted as saying in the Hindu report.

We found the video of the conversation where Rajan answered the question on demonetisation. The video was uploaded on the Harvard Kennedy School YouTube channel on April 20, 2018. At the 44.58 mark in the video, Rajan takes up a question on demonetisation.

Rajan says that demonetisation was not a well-planned, useful exercise which he informed the government then when the idea was first mooted. While admitting that he did inform the government regarding demonetisation, the former RBI governor asserted that demonetisation could have a negative economic impact, which was informed to the government.

Raghuram Rajan in an 2018 interview with NDTV's Prannoy Roy referred to demonetisation as a "bad idea." The comment can be heard at the 0.37 mark of the video attached below which was uploaded on the NDTV YouTube channel on December 17, 2018.

Additionally, we found that Rajan was not in the position of RBI governor when demonetisation was carried out. His term ended in September 2016 after his three-year term had expired.

Demonetisation was announced by Prime Minister Modi on November 8, 2016. As per details on the RBI website, Rajan was succeeded by Urjit Patel as governor of RBI in September 2016. Former RBI governor Urjit Patel served as RBI governor till he resigned from his post on December 12, 2018.

Conclusion:

We found that Raghuram Rajan was in talks with the Centre regarding demonetisation, where the former governor had advised caution to the government. In his book and latter conversations and interviews, he had criticised demonetisation.

Additionally, Rajan was not in the post of governor of the RBI when demonetisation was carried out. Thus, we can conclude that the viral claim regarding demonetisation is false.

If you have any news that you believe needs to be fact-checked, please email us at factcheck@thelogicalindian.com or WhatsApp at 6364000343.

Also Read: Fake Rate Card Promising Cash Rewards For Muslim Men Committing Love Jihad Viral Again