“Government ‘help’ to business is just as disastrous as government persecution. The only way a government can be of service to national prosperity is by keeping its hands off.” — Ayn Rand
Instances of radicalism wherein people insist on thinking for themselves and reject party-mindedness are rare to come by. Perhaps that is the way with Duvvuri Subbarao, as he steadfastly debunked government’s theory leaving interest rates and cash reserve requirements unchanged citing inflationary pressures despite economic growth slumping to a near decade low.
The Reserve Bank of India (RBI), which is as hushed inside as an Egyptian sphinx, is a place for establishment reserve. The office occupied by Subbarao, a soft-spoken, affable, sixty-two-year-old economist, has high ceilings, several wood-panelled shelves of economic textbooks, overlooking the Mumbai harbour. Its echoing hallways are lined with sombre pictures of past governors.
At IIT Kharagpur, where Subbarao was the recipient of director’s gold medal, he was known for his ‘way with numbers’ and ‘mastery of macro-economic issues’. Armed with tag of an ‘IAS’ topper, he is known as a gentle and accessible officer who has everything except the trappings of a bureaucrat. With a World Bank stint as a background and almost daily parleys with outgoing RBI governor YV Reddy in his role as finance secretary as current experience, he has played a hands-on role in carrying out the government’s agenda on inclusive growth.
Since his appointment as the 22nd governor of RBI on September 5, 2008, he has faithfully followed the policies of free-market conservative Alan Greenspan, and adheres to the central bank’s formal mandates: controlling inflation and inclusive growth. However, since the financial crisis struck the country in 2008, he has hiked interest rates over 13 times since March 2010; cut CRR by 125 bps in two stages since January, infusing about Rs 80,000 crore into the banking system. Though these measures are yet to have any major impact on the economy, in the eyes of many supporters and opponents, they represent a watershed in Indian economic history. Subbarao, who seemed to have been selected for his predictability as for his economic expertise, is now engaged in the boldest use of RBI’s authority since its inception.
Subbarao cannot be likened with Ben Bernanke, chairman of US Federal Reserve. In pure economic terms, these are the classical stances — one dovish, the other hawkish — being taken by Bernanke and Subbarao. Nevertheless, some economists agree that the similarities are uncanny and staggering. Both respect minority opinion and give people the feeling that they have been heard even when they are outvoted. Also, both share the conviction that, in an emergency, pragmatism trumps ideology. We see that in the way they realise that their respective institutions do not have the necessary resources of democratic legitimacy and it is important that government steps in and take control of the situation.
meghnamaiti@mydigitalfc.com
1 comment:
This article takes me back to my own comments in Business Standard (August 11, 2012)asunder:
"Vote for stability
In these turbulent times, the timely decision by Centre to give a two-year extension to RBI Governor Dr Subbarao stands apart as a decisive vote for stability at the Central Bank. This will strengthen the RBI to pursue the right course it has been following in different areas of its responsibility. A change of guard at this juncture would have resulted in slowing down of the processes of change in areas like fighting inflation, forex reserves management, financial inclusion and outreach and transparency in policy prescriptions where Dr Subbarao has made perceptible progress. On his part, the Governor should take this opportunity to hasten the initiatives he has taken to make RBI a change agent in the economic development of the country. Beyond the mandated responsibilities, one expects RBI to do much more in the areas of financial inclusion, gold and wealth management (as part of its forex reserve management), revival of grass-root rural financial institutions like cooperatives and balanced economic development across regions by ensuring an appropriate realignment of the outreach of institutional infrastructure using financial sector reforms as a tool".
One wishes tenures of positions where skills get sharpened on-job were longer and incumbents knew about it while joining.
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