‘Chidambaram Used To Pressurise RBI,’ Subbarao, ‘RBI A Cheerleader?’ Check What Upsets, Annoys Him
Duvvuri Subbarao is an Indian economist, former governor of central bank, and retired IAS officer. He was the 22nd Governor of Reserve Bank of India, under Prime Minister Dr. Manmohan Singh.
The finance ministry under Pranab Mukherjee and P Chidambaram used to pressurise the RBI to soften interest rates and present a rosier picture of growth to shore up sentiments, claimed former RBI Governor Duvvuri Subbarao in his memoir.
In his recent book ‘Just A Mercenary?: Notes from My Life and Career’, Subbarao also stated that there is ‘little understanding and sensitivity’ in the government on the importance of the central bank’s autonomy.
“Having been both in the government and in the RBI, I can say with some authority that there is little understanding and sensitivity within the government on the importance of central bank autonomy,” he wrote in the book.
Subbarao On Government’s Pressure On RBI
There is one chapter in his book titled ‘Reserve Bank as the Government’s Cheerleader?’, wherein Subbarao stated that pressure by the government was not confined to the Reserve Bank’s interest rate stance. On occasion, it extended to pressuring the RBI to present rosier estimates of growth and inflation at variance with our objective assessment.
“I remember one such occasion when Pranab Mukherjee was the finance minister. Arvind Mayaram, the finance secretary, and Kaushik Basu, the chief economic adviser, contested our estimates with their assumptions and estimates, which I thought was par for the course,” he wrote.
What Upsets, Annoys Subbarao?
What upset him, Subbarao said, was that when the discussion moved from objective arguments to subjective considerations, with suggestions that the Reserve Bank must project a higher growth rate and a lower inflation rate in order to share responsibility with the government for ‘shoring up sentiment’.
“Mayaram went to the extent of saying in one meeting that ‘whereas everywhere else in the world, governments and central banks are cooperating, here in India, the Reserve Bank is being very recalcitrant,” he stated.
Subbarao said he was invariably discomfited and annoyed by this demand that the RBI should be a cheerleader for the government.
Who Is D Subbarao?
Duvvuri Subbarao is an Indian economist, former governor of central bank, and retired IAS officer. He was the 22nd Governor of Reserve Bank of India, under Prime Minister Dr. Manmohan Singh. After stepping down from RBI, he was a Distinguished Visiting Fellow first at the National University of Singapore and later at the University of Pennsylvania.
At the start of his career as sub-collector of Parvathipuram sub-division in north-coastal Andhra Pradesh way back in 1974.
Subbarao is currently a senior fellow at the Yale Jackson School in the US.
