Former Reserve Bank of India Governor, D Subbarao, has made some shocking assertions in his book about his time at the RBI and his interactions with the then Finance Ministers. Subbarao alleged that the finance ministry, led by Pranab Mukherjee, and P Chidambaram, pressed the RBI to lower interest rates and create a more positive picture of development to boost the confidence of people in the government.
“Chidambaram typically argued his case like the lawyer that he so eminently is, while Mukherjee was the quintessential politician,” Subbarao wrote.
In the book titled “Just A Mercenary? Notes from My Life and Career,’ Subbarao spoke on the government’s ‘lack of awareness and sensitivity’ to the necessity of central bank 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 was finance secretary from 2007 to 2008 before becoming RBI governor for a five-year tenure beginning September 5, 2008, just days before the Lehman Brothers crisis took place.
In the book, Subbarao noted that government pressure was not limited to the Reserve Bank’s interest rate policy. On occasion, this pressure extended to pressing the RBI to produce more positive growth and inflation estimates, which deviated from the RBI’s objective judgment, he said.
Subbarao described his discussions with Chidambaram and Mukherjee, highlighting their differing approaches but common desire for softer monetary policy. He recalled moments when Chidambaram publicly disagreed with the RBI’s stance on interest rates.
“Mukherjee let his view be known and left it to his officers to argue his case”, he stated, adding that “the net result was an uncomfortable relationship”.
Subbarao stated that suggestions were made that the RBI project a higher growth rate and a lower inflation rate to share responsibility with the government for ‘shoring up confidence’. He admitted that there was a moment when he was consistently dissatisfied and annoyed by the demand that the RBI become a cheerleader for the government.
The previous RBI governor stated that he used to hold the firm belief that the Reserve Bank could not deviate from its best professional judgment just to manipulate popular emotion.
Duvvuri Subbarao began his career as a sub-collector for the Parvathipuram sub-division in north-coastal Andhra Pradesh in 1974. In 2013, he was appointed governor of the Reserve Bank of India during a severe exchange rate crisis. Subbarao is now an associate at the Yale Jackson School in the United States.
His most recent novel, ‘Just a Mercenary? Notes from My Life and Career’ describes his 74-year journey. The book contains numerous stories of his hopes and sorrow, accomplishments and defeats, mistakes and transgressions, and the lessons he learned along the road, all told with unusual candor and honesty.
