By Prof. S.N. Misra
Of the 25 RBI Governors appointed so far, 11 have been from ICS & IAS. The rest have been distinguished economists and bankers like I.G. Patel, who opposed demonetization move of Mr. M. Desai in 1977, or C. Rangarajan and M. Narasimham, who provided gravitas to the institutional autonomy of the RBI and introduced path braking banking reforms.
Mr. Y.V. Reddy, an IAS officer, as RBI Governor ensured financial stability during the global financial crisis of 2007-08, going against the political pressure of P. Chidambaram to reduce report rates. He was the lone Indian, who was included by Prof. Joseph Stiglitz, the Nobel Laureate, to be part of the Commission to examine the financial crisis.
We also have an example of Mr. S. Venkitaramanan, IAS who on joining as RBI Governor agreed to transfer reserves from RBI equity to the government, a move opposed by his predecessor Shi R.N. Malhotra, an IAS officer. He was my Additional Secretary in MoF in 1978, a rare breed.
The main agenda for the present government is how to get 4.5 lakh crore from RBI reserves to meet Fiscal Deficit target and go slow on Prompt Recovery Action, initiated by the RBI on the big defaulters.
Mr. Shaktikanta Das, the new appointee is a student of history from St. Stephen’s. He was the gladiator who marshaled ill thought out move for Demonetization. The Mint Road has shown in the past, how many IAS officers have changed bureaucratic acquiescence and shown excellent professional judgement, like Mr. Y.V. Reddy and Mr. D. Subbarao in the past and wrote wonderful books like ‘Advice and Dissent: My Life in Public Service’ and ‘Who Moved My Interest Rate? : Leading the Reserve Bank of India Through Five Turbulent Years’.
Shaktikanta would profit from reading these books, and the glorious tradition that straddles RBI and the metamorphosis that the breeze from the Arabian Sea possibly brings in. These lines from Robert Frost would be most apt to greet a fellow Odia, who I knew briefly during his college days:
Two roads diverge in a wood
And I took the one less travelled by
And that has made all the difference!
The RBI Act mandates the Governor to do three basic duties: ‘Regulate Money Supply and Credit Flow and Maintain Stability of Rupee’, by ensuring that inflation does not exceed 6 percent and its exchange rate does not drop propitiously. The original Act of 1934 also advised him not to be ‘politically influenced’. These words were deleted when Nehru’s India became a Republic. But the Constitution mandates in Schedule III that a constitutional functionary should operate ‘without fear or favour, affection or ill will’. This oath should apply to statutory authorities like the RBI Governor. The political appointment must not be an alibi to compromise on independent professional judgement, or to take the path less travelled!
About the author
Prof. S.N. Misra teaches Economics
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