An Insightful Memoir
This book is an insider account of India's policy-making and the RBI's restrained role in containing the crisis of 2008.
Any governor of the Reserve Bank of India (RBI) must walk a tightrope. He must seem to be independent but without offending the government of the day. He is not equal to the government but must convince others that he is not subordinate to it either.
And if he can do all this with the right policies in place, he may leave behind a career as illustrious as that of Dr Y V Reddy, the governor of the RBI from 2003 to 2008, a time of high growth, low inflation, an appreciated rupee and a robust banking system that withstood the global financial crisis.
Dr Reddy's book is an account of his life and his career from a young IAS officer to RBI chief and the chairman of the 14th Finance Commission. This book is an insider account of India's policy-making, but there is no pulsating drama or revelations. It is a remarkably restrained account as Dr Reddy does not believe in gossip and hearsay, but it is gripping because of his storytelling ability. His sense of humour is fairly well known. His famous quote on the RBI's autonomy is quite a legend: "I am very independent. The RBI has full autonomy. I have the permission of my finance minister to tell you that."
From his college days, Dr Reddy was a camp follower of communism, becoming disillusioned with it in 1982, when, in Leningrad, he saw long queues of people hoping to buy a broom. Nevertheless, his public policy stance was towards State action, and he remained a market-sceptic. In the post-liberalisation era, he published interesting works on the privatisation of public enterprises. Most importantly, his stints in the district taught him the art of withdrawal and compromise, which made him a brilliant negotiator. He was cautious about court prosecutions, arguing that court cases were too heavy a burden for a weak administration.
His crowning achievement was, of course, keeping India out of the global financial storm of 2008. His correct reading of the global economic situation was aided by his innate market scepticism, and he was able to take early steps against the overheating of the economy even in the face of political opposition.
The author writes about the "creative tension" between him and then finance minister P Chidambaram. He recounts that once on a Sunday, the then prime minister Manmohan Singh had called him to Delhi to his residence to tell him that Mr Chidambaram was very upset with him, and that the prime minister did not know how to sort it out. Dr Reddy further adds that he rushed to Mr Chidambaram's house. There was widespread speculation that he would resign, but he did not do so and instead offered an unconditional apology to Mr Chidambaram as he did not want to let down the prime minister.
Dr Reddy details another interesting account of his years at the RBI thus: "In the case of Mr Chidambaram and I, both were known to go into excruciating detail (sometimes excruciating to each other), and we had a reputation (entirely well earned) of being stubborn. In this spicy mix, we also had a prime minister who was both a former RBI governor and a former finance minister and knew the tricks of the trade of both sides. I sometimes wondered if the prime minister would have a quiet chuckle to himself while observing the back and forth between Mr Chidambaram and me. Recounting similar such episodes and more, this book throws light on the lessons of Dr Reddy's fascinating professional life as on the politics of his years in public service.