T N Ninan: Subbarao tells all

The last governor of the Reserve Bank to write his memoirs was I G Patel, who after a long career in the finance ministry was governor from 1977 to 1982. His terse but well-written Glimpses of Indian Economy Policy: An Insider’s View was published two decades later, in 2002, but disappointed many readers looking for “inside” stories. Dr Patel had a reputation for not suffering fools, but had decided to be discreet. Another governor’s memoirs have just been published. Fortunately, Duvvuri Subbarao has chosen to be frank where Dr Patel was reticent. Who Moved My Interest Rate, with its accounts of sundry run-ins with Finance Ministers P Chidambaram and Pranab Mukherjee, comes out just when another governor’s term is about to end in the midst of controversy.

We must hope to be treated to more disclosures when the still-being-written memoirs of Y Venugopal Reddy, governor before Dr Subbarao, are published. And the odds must be at least even that Raghuram Rajan will also write about his experiences as a policy-maker. So we are likely to be treated to the memoirs of three successive governors. It would be more if earlier governors who are still active were to pen their recollections — including such episodes as Bimal Jalan’s warning at a meeting with Atal Bihari Vajpayee and his senior ministers, during the aftermath of the Asian financial crisis in 1998, that the government should not ask him to defend the rupee (which had slipped below Rs 40 to the dollar), since forex reserves were still quite modest. When a senior minister asked how low it might go, Dr Jalan said anything was possible — even Rs 100! There were no more questions, and the governor had got himself a free hand.

Dr Subbarao’s memoirs bear the hallmark of his personality — marked by a transparent honesty and humility. Though he topped the civil service exam in 1972, he is clearly not a chest-thumping Alpha male; yet his record as governor was marked by the display of a steely spine during pretty open differences with the minister on a variety of issues, starting almost immediately after he took charge. The face-offs — sometimes in public — ranged from interest rate policy (naturally!) to ministerial intrusion onto central bank turf on liquidity management; from RBI’s criticism of fiscal excess for undercutting monetary policy to Dr Subbarao’s concern at RBI’s wings being clipped; and from a miffed minister cold-shouldering the governor at an official reception in Mexico to the churlish refusal — once by Mr Mukherjee and once by Mr Chidambaram — to accept recommendations on extending the terms of incumbent deputy governors. Dr Subbarao also has some sharp observations to make about the Srikrishna commission on financial sector legislative reforms (i.e. to streamline existing legislation), and contends that the commission over-interpreted its brief to be financial sector reform (a broader remit). Yet, Dr Subbarao says that in doing so it did not give a proper hearing to financial sector regulators. He is not alone in entertaining doubts about some of the commission’s recommendations.

Dr Subbarao took charge when the meltdown of the western financial system was already under way in September 2008. As a newcomer to monetary policy, he was learning on the job in the middle of an unprecedented crisis. Looking back, he asks some of the questions asked earlier by external observers, about his conduct of policy in that turbulent period; it is typical of him that he should admit to some retrospective doubts on a few issues. When someone in public office is as willing to re-examine his own performance as he is to be critical of his minister, the tribute comes from none other than the minister. In a back-cover blurb, Mr Chidambaram calls the book “a learned, meticulous and honest account…his intellectual integrity shines on every page of the book”. Dr Subbarao could not have asked for a better tribute.