The professor's chronicle of reforms

Former RBI Governor C Rangarajan's memoir is an analytical supplement to the history of the central bank, and useful in understanding the foundational measures for undertaking deep reforms

Forks in the Road: My Days at RBI and Beyond

Author: C Rangarajan

Publisher: Penguin

Pages: 346

Price: Rs 699

C Rangarajan’s memoirs, which are largely about the work in Reserve Bank of India (RBI), are different from the two other books written by former governors. Y V Reddy’s memoirs were about his professional life, with a large part of it focused on RBI and the financial system, and D Subbarao’s were restricted to his five-year stint at the RBI and nothing beyond. Both memoirs described the challenges the writers faced in their respective positions within a larger frame of personalities, hierarchies, tensions and anecdotes. Raghuram Rajan and Urjit Patel, former governors as well as Viral Acharya, former deputy governor, have also published books, but they were largely around the speeches they delivered when in office. Dr Rangarajan’s book appears to be a combination of both approaches — extensively dipping into his statements, speeches and written material during his time in office but also looking at the big picture in hindsight. If one is looking for juicy anecdotes that make for tantalising reading, this is not the book for you. Even when he tackles difficult and controversial aspects of his days in the RBI, Dr Rangarajan does not lower his  academic guard.

Dr Rangarajan was with the RBI during the most significant years for the post-independence economic administration. He was there during the 1991 balance of payments crisis, during economic liberalisation and reform, the process of licensing private banks — an initiative that reversed the policy of nationalisation and turned towards tolerating and accommodating the private sector — and when state-owned banks were brought into the markets, moving towards more market-facing reforms. That must have been an exciting time to be at the helm of affairs with plenty of negotiations with naysayers and reluctant reformers. We do not, however, get a glimpse about the art of negotiation but a dry and stoic narration of the outcomes rather than the processes.

The question is whether this is a good approach to write a memoir. In fact, Dr Rangarajan starts by asking whether it was essential to write this book, given that the RBI itself has produced a history of the institution and his time at crucial positions as deputy governor and later as governor was covered in that book. This doubt and the later decision to write, and the style he has adopted locates the approach nearer to institutional history rather than a personal memoir. Therefore, we find Dr Rangarajan the professor in the foreground, while the person recedes to the background. He examines the issues he tackled as structural issues needing a policy response. This policy response is tested on the theoretical basis to see if it has worked with the benefit of hindsight. There is little insight we get about the process of policy-making.

Dr Rangarajan presents his arguments and the policy measures that were taken along with data. Whether it is about the balance of payments crisis, rupee devaluation or the banking sector, the arguments are laid out in a dispassionate and detached manner. This is a good historical account of how the RBI’s role has been evolving. The transition from high levels of controls — where there were heavy preemptions for the banking sector in the form of cash reserve ratios and statutory liquidity ratios, and administered interest rates — to liberalisation, including on the exchange rates, marked a significant paradigm shift. Similarly, on the fiscal front, the move towards doing away with automatic remonetisation to lay the foundation for the Fiscal Responsibility and Budget Management Bill that was passed later could not have happened unless the preparatory work was done by the economic management led by the RBI and Dr Rangarajan.

It is not that Dr Rangarajan does not talk about people at all. He talks about them in a separate chapter, looking at people who were instrumental in shaping his career in many ways. It would have made a better reading, however, if the dramatis personae were also a part of the policy and analysis narrative. It would have made the book more readable and connected the ideological and idiosyncratic underpinnings in policy planning better.

There is also a stark difference in Dr Rangarajan’s role outside of the RBI where he has largely been in an advisory capacity. These are chapters that discuss his experiences at the Raj Bhavan, at the Rajya Sabha and as a part of the Economic Advisory Council. In each of these there is a sense of disappointment that there were interesting ideas but their implementation was to be done by someone else, as a result of which many of these ideas did not work. The other role where he had greater powers was as the Chairman of the Finance Commission, where he discusses important issues of fiscal federalism.

What the book tells us —without intending to —is that it is not sufficient to have a brilliant thinker amongst us, which Dr Rangarajan undoubtedly is, but also provide an appropriate context for the thinker to perform by vesting executive powers. This book is an analytical supplement to the history of not only the RBI, but the economic administration and useful to understand how the foundational measures were taken for undertaking deep reforms.

ssriram@pm.me. The reviewer is Faculty member, Centre for Public Policy, Indian Institute of Management, Bangalore