Govts swayed by short term compulsions, says ex-RBI Guv

In his new book, former RBI Governor D Subbarao has recalled numerous instances when he had differences with the then two finance ministers – P Chidambaram and current President Pranab Mukherjee, whom he served.

Differences were mainly because governments and central banks see the growth-inflation balance differently.

“Governments are typically swayed by short-term compulsions whereas central banks are expected to take a long-term perspective,” Subbarao said in the book 'Who Moved My Interest Rates - Leading the Reserve Bank of India through Five Turbulent Years' that hit the stands on Friday.

By the time Subbarao’s second term as RBI Governor came to an end in 2013, the government was so pleased with the way he handled the global financial crisis beginning 2008 that he was called by the then Prime Minister Manmohan Singh to convey that the government would be happy to bring him back into its fold once again.

“Do let me know if you want anything in the government. I will be happy to consider that,” Singh told him a month before Subbarao relinquished office.

Contrary to the popular belief that Chidambaram and Subbarao shared strained relationship, Subbarao, at many places in the book, has called Chidambaram “a reformist” and “a moderniser” who often had to balance his instincts with political compulsions.

Out of five years as RBI Governor, Subbarao worked only 15 months with Chidambaram as finance minister. The period was marked more for the differences between them than their cordial relations. But Subbarao has called Chidambaram a force behind RBI’s sense of urgency and alacrity on many issues.

"I know many people think that Chidambaram has an abrasive streak but I never experienced it… I had high regard for Chidambaram’s competence; if there was one person who could deliver in an admittedly complex and challenging political scenario…, it was he,” Subbarao wrote.

November 26 Mumbai terror attack had compounded worries arising out of global financial crisis. Mumbai was shut down, markets closed but Chidambaram was on the phone several times asking when we could reopen the markets.

He was particular that we must demonstrate to the world that India would not be cowed down by terrorists and that our financial markets were too resilient to be hit by anyone.