That practice has endured, even though the length of the speech of the current Governor Sanjay Malhotra is noticeably shorter than Das’. The August 2020 speech had 25 references to the word “financial”, coming as it did amid the throes of the Covid epidemic. Six years later this August the primary concern was “inflation” occurring 27 times. Inflation did not even figure among the top eight in the Word Cloud list.
Clearly, governors’ ’ speeches reflect the current concerns in a big way, which is why communication becomes a key part of their policy armoury.
Regulators communicate with the public with a purpose. They are not elected bodies but technical institutions, and so to earn public trust they have to make the effort. Yet this is often neglected as an area of study.
“This neglect is substantial, given the growing role of communication in response to declining public trust in government,” notes a recent research article by Gilad, Sharon, Moshe Maor, and Pazit Ben-Nun Bloom from the Hebrew University of Jerusalem (“Organizational Reputation, the Content of Public Allegations, and Regulatory Communication.” Journal of Public Administration Research and Theory: J-PART 25, no. 2 (2015): 451–78. http://www.jstor.org/stable/24484975)
There is, however, no major Indian analysis of whether the communication by the RBI Governors affects the economy or, if it does, how. Recently, as Kevin Marsh took over the mantle of Chairman of the US Federal Reserve from Jeremy Powell, The Economist undertook an analysis of the communication styles of (mostly) past US Fed chiefs and to what extent their comments guided money markets.
Communication styles have definitely changed at the RBI in the past two decades, but it is difficult to discern a pattern. Alpana Killawala, who headed the RBI communications team through the terms of Subbarao to Patel and is the author of ‘A Fly on the RBI Wall: An Insider’s View of the Central Bank’, which traces the evolution of the communication function in the RBI for more than two decades, says it is difficult to ascribe a pattern to the communication styles of the central bank’s governors.
The Governors themselves have not discussed whether their communication pattern had a purpose. If Raghuram Rajan was voluble, even in his monetary policy statement, his successor Urjit Patel even removed his name from the statement.
There was a reason for Patel’s reticence. Till the end of Rajan’s term, the Governor used to announce the interest rates alone. By the time Patel arrived, the Monetary Policy Committee was in place following the passage of the amended RBI Act in May 2016. Still, Patel’s reticence in communicating his actions stood out.
RBI Governors first began to change when Duvvuri Subbarao assumed office in 2008. He began the tradition (if one could call it that) of facing the camera to announce the policy rates. Until then, the RBI would call a meeting of leading bankers and announce its policies on interest rates at that meeting. Later in the day, Mint Street would make the decision public through a press release. For instance, the “Third Quarter Review of Monetary Policy 2009-10: Press Statement by Dr D. Subbarao, Governor” shows (https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=21997) the pattern. “This morning, I had a meeting with the chiefs of major banks where we released and disseminated the Third Quarter Review of RBI’s monetary policy,” it states matter-of-factly.
Subbarao also began to personalise the governor’s speech when he began to appear on TV to read out his policy statement. In January 2013, for instance, he began: “First of all, on behalf of the Reserve Bank, a warm welcome to you all to this Third Quarter Review of Monetary Policy for 2012-13”.
Rajan, of course, made a huge splash in terms of making communication from the central bank noticeable. In his first monetary policy statement, the ‘Second Quarter Review of Monetary Policy 2013-14’, he began with “Good Morning and welcome to the Reserve Bank” as a way to bring the audience (by now quite large) closer to the arcane world of money matters. He continued with this signature statement through the rest of his term except in August 2016, when he announced his last policy statement. The welcome note had disappeared. However, in his initial statement at the post-policy press conference, he noted: “This is my last policy statement, but there are still 28 days in my term which I intend to use fully”.
There is a pattern to this openness. Rajan and his predecessor Subbarao entered office when the Indian economy faced a crisis: the global financial crisis in 2008, when Subbarao took charge, and that of the US’ taper tantrum in 2013, when Rajan was appointed.
The paper by Gilad, Sharon, Moshe Maor, and Pazit Ben-Nun Bloom argues that regulators tend to communicate more when there is a claim of under-regulation. They become quiet when the public claims too much interference. “When audiences claim that regulation is overly lenient (namely, under-regulation), the regulator is relatively inclined to admit a problem, yet shift blame to others, rather than either keeping silent or denying the alleged harm. Conversely, when audiences claim that regulation is excessive, the regulator is inclined to deny the significance of the alleged harm and justify the public value of regulatory intervention”.
Both Subbarao and Rajan had to face criticism that both the RBI and the finance ministry were caught napping when the crises struck. Subbarao went in for repeated cuts in the repo rate while Rajan deployed a large number of measures to make the rupee regain its strength. He also had to issue press statements.
A similar strategy played out early in the term of Das. Covid was a tough environment to operate in, creating a risk that economic activities would sharply slow. Not only did he begin the practice of issuing a ‘Governor’s Statement’, he also made a practice of lacing the speech with uplifting quotes, usually from Mahatma Gandhi.
The opposite pattern of “denying the significance of the alleged harm” played out during the term of Patel. His statements were detailed, but there was no mention of the term demonetisation in the Fifth Bi-monthly Monetary Policy Statement, 2016-17 issued just one month after the issue to demonetise Rs 500 and Rs 1,000 bank notes. A Word Cloud search shows there were 21 references to inflation and 19 to liquidity instead.
