Despite differences Chidambaram did not want RBI Guv V Y Reddy to quit

 Differences between Reserve Bank of India Governors and finance ministers over the key policy issue are common but for a finance minister to say that he would not work with any other person than the same governor despite disagreement can only happen in the case of Y V Reddy as RBI Governor and P Chidambaram as his boss.

Reddy, 75, in his memoir – Advice and Dissent: My Life in Public Service – to be released on Tuesday, has said that in his tenure as RBI Governor from 2003-2008, he wanted to quit twice and both under Chidambaram's regime. But Chidambaram insisted, “even if Venu wants to go, I would like him to stay”.

The major disagreement between Chidambaram and Reddy were over financial sector reforms. Chidambaram's concern was that the RBI was not adequately reciprocating by progress with reforms. Reddy felt that skill levels in organisations and the government arrangements were not in a position to respond appropriately to the reforms of the financial sector without serious damage to their balance sheets.

“Despite the unwillingness of the finance minister to relieve me, I felt that there was a growing distance between us as months passed by. His image as a reformer pushing for double-digit growth was, in his view, being dented by any caution to the extent of resisting implementation of some of his policies,” Reddy writes in his book.

He goes on to say, “at one stage, he (Chidambaram) said he was cancelling his foreign tour because he could not face them with nothing to report on reforms. His frustration was confirmed later, I think in early 2008”.

Reddy says even as Chidambaram and he would have consultations on monetary policy, there were occasions on which Chidambaram would express his opinions in public.

“This meant, first, if I were to announce measures that were contradictory to the minister's public statement, it would send confusing signals. Second, it would mean that, by the time my policy was announced, his statements had already influenced expectations – and therefore my policy then became less effective”.

He says, he raised the issue several times with the minister who would sympathise with Reddy's point of view but still thought it was legitimate for him to express his opinion as a finance minister in a democracy.

Reddy and Chidambaram who worked together on four Union Budgets from 2004 to 2008 gave the highest priority for banking and financial sector reforms.

“He was generally supportive of structural and governance changes in public sector banks. But i could recognise his political constraints in reforming the public sector banks,” Reddy write about Chidambaram in his book which devotes a full chapter on working with Chidambaram.