Governing RBI

RBI Governors. The Czars of Monetary Policy (1935-2021)

Author: Gokul Rathi

Publisher: Rupa Publications

Pages: 217

Price: Rs 595

In the last decade, the Reserve Bank of India (RBI) has been in the news not only because of the overarching influence it has on monetary policy – which is covered extensively in the print and electronic media – but also because of its leadership. Governors Raghuram Rajan and Urjit Patel were in the news during their tenures, the former for his speeches and outreach and the latter for his silence and inaccessibility. 

D Subbarao and Y V Reddy, the governors who preceded Dr Rajan and Dr Patel were in the news more recently because of their books, in addition to being acknowledged during their time in office. Each had their own style and approach to connect to the world at large and convey their messages. Interestingly, the most significant reform process began during the time of 

Dr Rangarajan, and the best crisis prevention occurred during Bimal Jalan’s time. But neither governor was in the news as much. Even when Dr Rangarajan published his book recently, it got the old-style response: Reviews and discussions, without flamboyant launches and exclusive interviews.

Gokul Rathi’s book is an acknowledgement of the larger interest that people may have in the workings of the RBI. It traces the history of RBI by profiling the governors who headed the organisation. While the sub-title talks about monetary policy, it is only in recent times that monetary policy has become a big piece in the order of things at the central bank.

For many who worry about the question of the central bank’s autonomy and the fear of overreach by the government in recent times: Take solace. RBI has been grappling with this, across many regimes. Unlike many central banks, where the job of the monetary authority, the role of development of the financial sector and the public debt office are seen as distinct functions, it is integrated into a full-service central bank in India. This means that absolute independence and autonomy — as in the case of the Comptroller and Auditor General, the Finance Commission or the Election Commission — is not available to RBI. At the same time, the governor enjoys a fair amount of autonomy by virtue of the statute. It is a question as to how individuals exercise and signal their autonomy.

Mr Rathi’s book brings out these complexities in a dispassionate manner. There is no scoop, no undocumented scandal and so sensationalism in the book. He draws from multiple public sources to string this book. Clearly, the amount of detail available about each governor varies and, therefore, his portraits are also sometimes sketchy and sometimes detailed. There is more context and detail about the recent governors than the past, but that is to be expected.

This is also an interesting way of understanding institutional history and how it has evolved over time. While the role of RBI in the overall economic order of things gets redefined through the book, it also pays adequate tributes to people who initiated fundamental changes — in particular during the regimes of Dr Rangarajan and Dr Jalan. Though the changes that happened in the last four decades have been dramatic, Mr Rathi has taken a wry and dispassionate approach. So, while some of the governors were living in both tense and exciting times, Mr Rathi evens it out with his narration. That is the advantage of hindsight. What looks like a crisis and something that can fundamentally compromise the autonomy of the institution looks like a small blip in retrospect. Therefore, a reading of the book with such a large canvas provides us with a sense of optimism, that time will after all heal wounds that may be inflicted on the institution. Whether it was about appointing a lackey at the helm during the Emergency, the multiple demonetisation exercises, or the stripping of resources through demands on dividends or even setting up committees and mechanisms that undermine the primacy of the central banker. It looks like RBI and its technocracy has been able to weather all this over time.

A book based on secondary research by definition relies on published and public sources. Naturally, the book is rich with details on how the governors dealt with the external world — their communication with the world at large and their interface with the finance minister. What this book is unable to get is how the governors shaped the internal workings of RBI. There is a mention of Dr Rajan’s reorganisation of RBI and wanting to appoint a deputy governor as a chief operating officer. However, there is much that each of the governors brought to the central bank and its functions as it evolved. A mapping of institutional changes and initiatives would have made the book much richer. While acknowledging the research that has gone into making of the book and the ease with which it reads, it would be unfair to expect more. However, beyond the documented history of RBI available in four volumes (and also in a concise edition) brought out by the RBI itself, there is much scope for further documentation. RBI maintains a good and easily accessible archive and it should be possible for scholars interested in perusing this line of research to examine multiple facets of RBI.

This book needed a strong introduction that connected these individual stories together to present a comprehensive view. It also needed better editing to cut out unnecessary trivia as a footnote, when the trivia also appears in the text. But for these shortcomings, this book is an interesting read.

mssriram@pm.me. The reviewer is professor, Centre for Public Policy, Indian Institute of Management, Bangalore