When I’m Sixty-Four: From the Governor's Diary

Saturday, August 11, is the 64th birthday of Dr. Duvvuri Subbarao, governor of the Reserve Bank of India.

The RBI website very aptly says that few personalities are so close yet so distant to India's populace as the governor of the Reserve Bank. Central bankers are traditionally conservative and publicity shy. This reporter chanced upon a page from the governor’s secret diary and has reproduced it here.


Dear diary,

How time flies. Before I know it, another year is upon me. As I turn 64, I am also about to complete a fourth year as Governor. When I took over the helm of the central bank in September 2008, I was accosted with the biggest financial crisis we had faced in our lifetimes and as I write today, I am again faced with the double-whammy of a long brewing crisis in the euro-zone and a slowing domestic economy.

A year older is supposed to be a year wiser. I am not too sure about that, but yes it does come with loss of hair. The one I cracked the other day about my receding hairline does seem to have caught the media's fancy. (http://www.hindustantimes.com/News-Feed/Chanakya/The-price-we-must-pay/Article1-893361.aspx)

Although I admit I am not big on making birthday wishes, I can't help wonder what if I could really ask for anything as I turn a year older.

The thought caught my fancy last Saturday on my way back to Mumbai from Hyderabad, when a pesky, young wire reporter accosted me with an unusual question. I am generally asked about interest rates and the currency -- nothing I cannot tackle -- but I wasn't quite prepared when she asked me "Governor, your birthday's coming up. What would you wish for?"

"Well, I have many," I said.

Probably not a good enough answer. She persisted.

So, I told her "I hope that the last year of my tenure as RBI governor is less crisis-ridden than before."

Well, one knows one cannot tell the media everything. So, let me pen some thoughts for myself.

1.  To cut or not to cut:

My former boss Pranab babu is now happily ensconced at Raisina Hills taking his long walk on the lawns. Mr. Chidambaram, the new man at the helm is someone who I have a fair acquaintance with, having worked at the Ministry and the RBI. So my first thought was ‘the working equation will be good’. Yet, why do I see some ominous signs? In his first briefing to the media, Mr. Chidambaram says interest rates are too high and sometimes one needs to take calibrated risks to stimulate investment. Is he hinting at a rate cut? I have asked the government to get its fiscal house in order. Let's see how this plays out. Why the FM alone?  A businessman travelling by the same flight as mine last week, yelled out at me from the back of the aircraft, "Sir, please lower interest rates, sir please!" It isn't easy to pacify anyone.

 2. Keeping the market happy:

I have been accused of springing surprises many times.  Economists say the markets ran for cover when we 'unexpectedly' cut banks' compulsory bond-holding requirement by 1% last month. I was accused of a similar thing in June when I kept rates on hold, belying hopes of another rate cut after the April policy. In fact, a foreign brokerage said the RBI has displaced the Malaysian central bank as the least predictable central bank in Asia! Fair enough. But, I must say it is not the Reserve Bank's intention to surprise. A central bank governor has to do what he has to do.


3. Push Financial Literacy:

Many people think of the Reserve Bank as a mysterious institution, as a monolith which has no relationship to people's daily lives. Most people think of it as a currency printing office. In fact when I go to schools, children ask me, "why don't you print more currency, because that way India can become a rich country?" and, "we probably don't have enough money because the governor is not able to sign notes fast enough."

It may be amusing. But, without financial literacy you cannot have the economy firing on all cylinders over the long-term. It is a must for financial inclusion and hence growth. (About printing more currency, I'm reminded me I should follow up on that plan to introduce those durable, plastic notes)

4. Pray for a More Rains, there's still time:

After I topped my civil service exams in 1972, my first posting was as a sub-collector in the Ernakulam district in Andhra Pradesh. District collector and sub-collectors play an important role when it comes to rains and water. We have to assess the ground situation to decide whether to declare a drought or flood based on the behavior of the monsoons. It was then that I realized my emotional well-being, my career prospects depended on rains." Now, about four decades later, I still remain hostage to the monsoon. Now, at the end of my career as the Governor of Reserve Bank, I realize that my entire performance will depend on rains and not what I do about interest rates. If there is good monsoon, it is ok. Otherwise the Governor of the Reserve Bank is to be blamed.