india as a modern economy and an inclusive society. 5. as governor of the reserve bank during 1943 – 49, sir chintaman ’ s intellectual values, progressive outlook, meticulous planning and his ability to think outside the box played a critical role in steering the economy through turbulent waters. i know from personal experience that the job of a governor, more than most other positions, involves managing the tension between doing what is expedient in the short - term and what is good in the medium to long run. by his actions, sir chintaman demonstrated that the dharma of a central banker is always to defend long term sustainability against short term compulsions. 6. i struggled to determine how best to pay a tribute to a person of the intellectual stature and social commitment of sir chintaman. as i read about him, i realized that he was among those who believed in building a modern india based on reevaluating conventional wisdom and finding fresh approaches to old problems, and new answers to old questions. 7. that has a resonance with the situation today as the world is trying to grasp the aftermath of the most devastating financial crisis of our time. the global crisis has challenged many of our ideas and reopened questions that we thought have been settled. in the spirit of paying tribute to the memory of shri deshmukh and his remarkable intellectual traits, i want to raise five old questions and see how the crisis has possibly thrown up new answers. the five questions are : ( i ) have emerging market economies ( emes ) decoupled from the advanced economies? ( ii ) should central banks persist with pure inflation targeting? ( iii ) should financial stability be an explicit mandate of central banks? ( iv ) are controls an appropriate mechanism for managing the capital account? ( v ) has fiscal dominance of monetary policy ended? question 1 : have emerging market economies ( emes ) decoupled from the advanced economies? 8. the answer before the crisis was an increasingly assertive “ yes ”. the decoupling hypothesis held that even if advanced economies went into a downturn, emes would not be affected because of their improved policy framework, robust external reserves and resilient financial sectors. it is difficult to trace the precise origins of the decoupling hypothesis but it would be fair to surmise that it was inspired by the superior growth performance of emes as compared to advanced economies. 9. clearly, differential growth performance by itself is not conclusive confirmation of the decoup

preparatory work in this regard. another relevant aspect is the compensation of non - executive directors on the board. there is a view, also articulated in the government of india ’ s corporate governance voluntary guidelines 2009, that companies should have the option of giving a fixed contractual remuneration, not linked to profits, to non - executive directors. in the banking sector, nonexecutive directors are typically compensated through sitting fees, except non - executive chairmen who are paid a regular remuneration. the question is whether non - executive directors of banks should also be paid a regular or a fixed contractual remuneration. this is probably a good concept, but difficult to implement in practice. typically, in banks, the outcomes of risks taken become manifest after a long gap. while it is possible to align compensation of executives to the risks since they are long term employees, it is more problematic in the case of non - executive directors who serve for relatively shorter periods and have term limits. furthermore, unlike wholetime executive directors, non - executive directors function collectively as a part of the board and committees of boards making it difficult to apportion responsibility on them individually. notwithstanding these implementation issues, we need to debate on how to align the compensation of nonexecutive directors to the outcomes of corporate governance. splitting the posts of chairman and ceo of banks splitting the posts of the chairman and the ceo of banks is another issue that has generated a contentious debate. the ganguly committee appointed by the reserve bank had recommended that the posts of the chairman of the board and the ceo of the bank should be bifurcated. the logic is that such a bifurcation of leadership of the board from the day to day running of the business will bring about more focus and vision as also the necessary thrust to the functioning of the top management of the bank. it will also provide effective checks and balances. the reserve bank implemented the ganguly committee recommendations in all the private sector banks in 2007. experience shows that this arrangement has worked well. in fact, the ganguly committee recommendation to this effect has been echoed by the basel committee on banking supervision ( bcbs ) in its document entitled, “ principles for enhancing corporate governance ” which was put out last year. let me quote briefly from the document. it says, “ to achieve appropriate checks and balances, an increasing number of banks require the chair of the board to be a non - executive, except where otherwise required by law. where a bank