Dec 27, 2024 09:05 PM IST
Duvvuri Subbarao recalls his time as RBI governor, emphasizing Dr. Singh’s advice to focus on real people’s needs amid economic challenges.
I was finance secretary in Delhi when I was appointed governor of the Reserve Bank of India (RBI) in September 2008. Before moving to Mumbai, I went to call on Prime Minister Manmohan Singh to thank him for the confidence he reposed in me. It was a brief meeting — just about 15 minutes. We talked about the economic situation, of course — the government’s fiscal challenges as well as RBI’s unlikely problem of defending the rupee against appreciation.
After about 10 minutes of this, I said: “Sir, you were governor of RBI yourself. Do you have any advice to give me?” Dr Singh very characteristically demurred with that faint smile of his which you saw more in his eyes than on his lips. “What advice do I give you, Subbarao? You’ve been in the IAS, you know the country, you know the government, and you are familiar with RBI. Do what you think is best for the economy. I am sure you will do well,” he said.
After a couple of minutes, I took leave of him. As I got up, he rose from his chair, came from around the table and escorted me to the exit. At the door, he put his hand on my shoulder and said: “Subbarao, you asked for my advice a moment ago. I do want to give you one piece of advice. You are moving from the IAS into RBI. That’s a big change. Unlike in the IAS, in RBI, you run the risk of getting lost in numbers like inflation, interest rate, money supply and credit growth, and you will tend to forget how all this matters to people and their livelihoods. Keep your ear close to the ground.”
My mind was so clogged at the time with all the things that I had to do to wind up in Delhi and move to Mumbai that Dr Singh’s advice disappeared from my head within a minute of after I left his office. The real import of his advice came to me when I cut my teeth into the RBI job over the next few months. Consider this. In the lead-up to the policy review every quarter, RBI runs through a standard drill of consulting all stakeholders — banks, non-bank finance companies, economists, and markets. No governor has ever said: “OK, now get me 25 ordinary people from the street as it were. I want to consult them on inflation, jobs and other things that matter to them.”
What RBI does matters to people’s everyday lives. Yet RBI neglects to consult those everyday people. Inflation after all is a regressive tax. It hurts the poor more than it hurts the well-off. Keeping an eye on them was what Dr Singh was telling me through his doorstop advice.
Manmohan Singh had great regard for RBI and understood the need to preserve its autonomy. Differences between the government and RBI on policy direction are not unique to any one government or any one RBI governor; in some sense, they are hardwired into the system. Those differences showed up during the UPA government as indeed they are showing up today during the National Democratic Alliance government. That is par for the course.
Those differences, however, become sharper when the economic situation is grim and complex as was the case during United Progressive Alliance II (2009-14). Recall there was much talk of policy paralysis within the government and there was fear of stagflation — low growth and high inflation. I had differences with the finance ministers of that time — Pranab Mukherjee and P Chidambaram — on policy directions. To his enormous credit though, Dr Singh never interfered in the policy action. Whenever I went to brief him on our proposed policy action, “I hope you’ve settled this with the finance minister” was all he’d say. I never felt comfortable with this bit of the conversation, but I would nevertheless tell him of the finance minister’s reservations and the matter would end there.
An endearing quality of Dr Singh was his keenness to understand the ground situation. He once asked me, from out of the blue, if banks were functioning normally in extremism-affected areas. I was deeply embarrassed because it never occurred to me to probe that question. Another time he asked me about farmers’ suicides in my home state of Andhra Pradesh and at another time about how the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), the employment guarantee scheme, was actually working at the field level.
I was a mid-level official in the finance ministry in 1991 when India unleashed the blitzkrieg of reforms that changed the course of our history. Dr Singh’s first budget speech where he famously invoked Victor Hugo to say: “No force on earth can stop an idea whose time has come” will surely go down as one of the most iconic budget speeches in India’s economic history.
In one of his last media interactions, Dr Singh said that history will be kinder to him (than real-time critics and commentators). That certainly will be true of this thoughtful, scholarly, humble and mild-mannered man who served the country with great dignity and distinction.
Duvvuri Subbarao was governor, Reserve Bank of India (2008-13), and is now visiting faculty at Yale. The views expressed are personal
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