Duvvuri Subbarao, the former RBI Governor, delves into the intricacies of government-central bank relations during his tenure in his latest book 'Just A Mercenary?: Notes from My Life and Career'. He underscores the challenges encountered, particularly during the administrations of Pranab Mukherjee and P Chidambaram, where the finance ministry exerted pressure on the Reserve Bank of India (RBI) to lower interest rates and portray a more optimistic economic outlook.
In his memoir, Subbarao highlights the UPA government's lack of comprehension and appreciation for the central bank's autonomy, emphasizing the limited understanding and sensitivity within the government regarding this crucial aspect.
Drawing from his dual experience in both the government and the RBI, Subbarao recalls instances where government officials contested the RBI's estimates and advocated for a rosier economic forecast. He recounts a specific incident during Pranab Mukherjee's tenure as finance minister, where disagreements arose over economic projections, reflecting a clash of perspectives.
Expressing discomfort with the notion of the RBI acting as a mere cheerleader for government policies, Subbarao emphasizes the importance of the central bank maintaining its professional judgment and refraining from altering projections to manipulate public sentiment. He points out the inconsistency in the government's demands for higher growth estimates alongside advocating for softer interest rate stances.
Throughout the book, Subbarao details his interactions with Chidambaram and Mukherjee, noting their differing approaches but shared inclination towards softer monetary policies. He recounts instances where Chidambaram openly expressed disagreement with the RBI's stance on interest rates, reflecting the tensions inherent in the government-central bank relationship.
Subbarao also reflects on events from October 2012 when Chidambaram resumed his role as finance minister, highlighting the pressure exerted by him to lower interest rates despite objective considerations.
Despite the challenges faced, Subbarao's memoir provides insights into his career journey, offering a nuanced perspective on economic governance and the intricacies of policymaking in emerging economies. Currently serving as a senior fellow at the Yale Jackson School in the US, Subbarao's reflections draw from his extensive experience in navigating economic challenges on both domestic and global fronts.
