RBI governor Duvvuri Subbarao has penned a memoir titled Who Moved My Interest Rate?,which will be a welcome addition to the barrage of non-fiction and self-help books on the market for a number of reasons. Subbarao, who served his tenure between 2008-2013 at the RBI, has written about how the Congress-led UPA government has often overstepped its boundaries, delving into the territory of the central bank.
Subbarao served at the central bank at a tumultuous time in the world of finance. He ascended the position ten days before the largest bankruptcy in the history of the USA was filed by Lehman Brothers Holdings in 2008, and stepped down in 2013 in the middle of a taper tantrum when India was hammered by capital flight.
In his book, Subbarao shows the palpable tensions between the two institutions- the ReserveBank of India and the government. The government has often been intrusive in the matters of jurisdictional authority and operational autonomy of the central bank. Subbarao’s book is an important landmark for being among a few who have spoken out about such matters.
One instance of the clash between the two institutions came to the forefront in October 2012, when the then finance minister P. Chidambaram openly spoke out against the central bank’s decision to refuse to cut the policy rate despite public demand in the half-yearly review of the monetary policy, to continue with the fight over inflation. Another major instance Subbarao highlights in his book occurredwhen the then finance minister, Pranab Mukherjee, almost announced the monetary policy an hour before the central bank was to announce the same.
The book also helps shed light on the deeper impact these clashes may have on the greater workings of the country’s finances in later days. While Subbarao’s book offers a glimpse inside the strained relations between the two authorities from 2008 to 2013, later instances have not been much better. Raghuram Rajan’s decision to step down from his chair as governor of the central bank following a series of personal attacks from BJP leader Subramanian Swamy is an important instance. The book essentially exposes the vulnerability of the central bank in the hands of political powers and aims to show how this can harm the overall image of India in the eyes of investors.
The book should serve as a reminder to the present day Modi Government about earlier mistakes in failing to acknowledge the constitutional importance of the central bank and how it can be dangerous to repeat them.