When Duvvuri Subbarao, governor-designate of the Reserve Bank of India, takes charge of his new office on Friday, there is a good chance that the surroundings may not appear too unfamiliar to him — he has served on the central board of the central bank since May 2006 as a non-official director, one of 15 nominees.
Apart from the slot on the board, Subbarao has interacted closely with RBI as the economic affairs secretary. In this role, his interaction with RBI was critical at a time when the country grappled with rising inflation and the need for a fiscal and monetary policy framework to tackle this crippling tax on the poor.
To that extent, he would have the unsurpassed advantage of having been on both sides of the wall. For he, better than anyone else perhaps, understands the possibilities and limitations of all the tools that can be employed to control inflation.
Veteran observers of the North Block-Mint Road axis are not at all surprised at his appointment. The 59-year-old native of Andhra Pradesh brings formidable academic and administrative credentials to the job.
At a time when the role and work description of India’s central bank is undergoing a review, Subbarao’s career profile will be an added advantage.
He was the finance secretary of Andhra Pradesh when the state was undertaking crucial economic reform; so, he understands the pain of reforming the system and its attendant political perils.
A pointer in this regard is the subject of his doctoral thesis, “fiscal reforms at the state level”, a subject that India has debated for long and one that remains alive even now.
As there is little doubt that RBI will continue to play a lead role in the country’s endeavours to control inflation (with fiscal controls seeming to have run their course), Subbarao’s training as an economist-bureaucrat will serve him well.
It is this characteristic that got him the vote of both, his predecessor, Yaga Venugopal Reddy, and his mentor, Chakravarthi Rangarajan, who was the Andhra Pradesh Governor when the state was grappling with reform and supported what Subbarao was trying to do.
More than that, it is two qualities that made Subbarao score over his immediate rivals in getting the top job. One was proven administrative capability.
“When you’re the RBI Governor, you don’t have time to say: ‘let me put up a note’; ‘let me talk to someone’. It is your call and the buck stops with you. You need to show leadership,” said a senior government source, adding that the others in the reckoning were not seen to have similar administrative abilities.
The other quality, Subbarao’s colleagues say, is his political correctness. Never does he speak ill of anyone, not even those who may have harmed him, and will actually close conversations that tend to veer in that direction. A junior colleague of his in the Indian Administrative Service describes Subbarao as a gentleman.
These are the very qualities that will stand Subbarao in good stead as he battles the demon of rising prices. Having controlled the levers of the fiscal and administrative fight back to dampen inflation, he will now command the levers of monetary policy to control inflationary expectations.
In a few short weeks, the nation will get to see how he walks the tightrope between maintaining India’s economic growth and keeping prices in check. Over to Mint Road.
