“ust a Mercenary? Duvvuri Subbarao’s Memoir Unveils the Tensions Between the RBI and the Government

In his recently published memoir, Just a Mercenary?: Notes from My Life and Career, former Reserve Bank of India (RBI) Governor Duvvuri Subbarao takes readers on a captivating journey through his distinguished career, spanning diverse roles from sub-collector to finance secretary and ultimately, the helm of the central bank.

Subbarao’s memoir offers a candid and insightful exploration of the challenges he faced, the lessons he learned, and the profound impact his experiences had on shaping his perspective on the complex relationship between the government and the central bank.

Pressure from the Finance Ministry

One of the central themes that emerges from Subbarao’s memoir is the persistent pressure exerted by the finance ministry under Pranab Mukherjee and P. Chidambaram on the RBI to soften interest rates and present a more optimistic picture of economic growth.

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, Subbarao writes, highlighting the disconnect between the two institutions.

In a chapter titled Reserve Bank as the Government’s Cheerleader?, Subbarao recalls that the pressure from the government extended beyond just the interest rate stance, with the RBI occasionally being asked to present rosier estimates of growth and inflation that diverged from its own objective assessments.

Navigating the Lehman Brothers Crisis

Subbarao’s tenure as RBI Governor coincided with a pivotal moment in global economic history – the Lehman Brothers crisis. Just a few days before the collapse of the investment bank, Subbarao took over the reins of the central bank, facing the daunting task of steering India’s economy through the ensuing turmoil.

In his memoir, Subbarao reflects on the harsh challenges that emerging economies like India faced in an unequal world, where the reverberations of a crisis thousands of miles away could have such a profound impact on the country’s financial landscape.

The Importance of Central Bank Autonomy

A recurring theme in Subbarao’s memoir is the critical importance of central bank autonomy, a principle he believes is often misunderstood and underappreciated by the government.

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 writes, highlighting the need for greater appreciation and respect for the RBI’s independence in policymaking.

Subbarao’s observations on this issue are particularly relevant in the context of ongoing debates about the role and autonomy of central banks, not just in India but globally.

Lessons from a Diverse Career

Subbarao’s memoir also offers insights into the broader arc of his career, from his early days as a sub-collector in Andhra Pradesh to his time as finance secretary and ultimately, the RBI Governor.

One striking anecdote he shares is from the start of his career, when he learned that tribal development requires more than enthusiasm; it requires most of all an understanding of poverty. This lesson would go on to shape his approach to policymaking and his empathy towards the challenges faced by the vulnerable sections of society.