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.

India Business Journal - - READERS' LOUNGE -

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.

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