Dr Subbarao's New Year Message

Financial Express, January 7, 2013

RBI Governor's New Year Message to colleagues:

Calling himself a "green horn" at the time of joining Reserve Bank as its Governor over four years ago, Duvvuri Subbarao has now set a goal to demystify the 'black box' image of RBI and make it a role model for central banks globally.

"For an outsider looking in, the RBI is like a black box. Everyone knows people in there do important things, but cannot figure out the connection between that and their lives"

"It is important that we demystify the RBI so that people know enough to demand accountability from us," Subbarao said in a new year message to his colleagues, while listing out his priorities for the central bank at an institutional level in

2013 and beyond.

"The quid pro quo for autonomy is accountability. We must be sensitive to the fact that we are a group of unelected technocrats handling important public policy and we should be able to explain and defend our policies and, where necessary, learn from the feedback we get," he said.

"Many of you, having been in the Reserve Bank all your careers, may not realise how important this (the role of RBI) is. But I do, because I was outside RBI for much of my career," said Subbarao who became RBI Governor in September 2008.

"I do hope that in a few years from now... everyone watching and evaluating us would say that RBI is a role model for the kind of knowledge institution that a central bank should be," he said.

Recalling the time of his joining RBI, Subbarao said he entered the central bank barely days before the global crisis erupted.

"Sure, the crisis was big; sure I was a green horn," Subbarao said.

Before joining RBI, Subbarao was Finance Secretary in the Finance Ministry, while prior to that he had been Secretary to the Prime Minister's Economic Advisory Council and lead economist in the World Bank, among other important roles.

One of the first IITians to join the civil service, 63-year old Subbarao was a topper in the All India Civil Service examination in 1972.

Subbarao was appointed RBI Governor initially for a three-year term, but his tenure was later extended by two years till September 4, 2013.

While people may consider his initial days at RBI as the "most daunting phase" of his tenure, it is the year 2012 that has been the "most challenging year" so far, Subbarao said in his new year message.

"... as uncertain as the crisis time was (in 2008), the policy directions were quite clear. Judgement was required not much on the precise content of the policy but on timing and on communication," he said.

On the other hand, 2012 was different because RBI had to manage the "delicate policy balance between supporting growth and reining in inflation and carefully calibrate the content, timing and communication of the policy," he said.

Terming the management of this 'growth-inflation policy balance' as a valuable lesson, Subbarao said his endeavours in 2013 would be to make RBI a more value adding public institution.

"Post-crisis, central banking is going through a churning both in terms of what central banks should do and how they should do it. Central bank mandates are being revisited and redefined. Central bankers too are radically changing the ways in which they make policy and communicate it," he said.

Calling for a need to make RBI a role model for central banks across the world, Subbarao said it would require "pushing the envelope, be at the frontiers of domain

knowledge, often times reinventing it, but all the time remaining sensitive to the core concerns of an emerging market economy, one which is still home to hundreds of millions of poor people."

Listing out his other endeavours as a central banker, Subbarao said that RBI should be known as "an institution based on ethics".

"It will be difficult to write down a comprehensive code of ethics that will provide an answer to every situation and every dilemma we face in our work lives. But the guiding principle for an 'ethical institution' is that we should always be sensitive to the trust the public have reposed in us and ensure that everything we do or say helps to retain the trust," he said.

Talking about the need to demystify the RBI, the Governor said it would require spreading awareness among common people about what people do at RBI and why that makes a difference to them.

Subbarao said it will require "several things" to demystify RBI, but by far the most important is to be "communicative, honest, open minded and accountable".

"We also need to learn to listen," the RBI Governor said, adding that he has made a conscious effort to make the management of the central bank collegial, inclusive, open and transparent.

"As much as the top managers explain emerging policy issues to the entire institution, they also learn from the feedback they get from the field.

"I know for a fact that this feedback from bottom up has been influential in designing our policies," Subbarao said, while asking his colleagues at RBI to come up with ideas for achieving 'best practices' on various dimensions at the central bank.

Reader's Comments(2)
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Case for longer tenure at the top


This assessment of the role of the central bank and an appraisal of sorts of himself and his colleagues makes the case for longer tenures for incumbents at the top of institutions like RBI stronger. GOI should sit back and think whether it was necessary to ease out Subir Gokarn in just two years. Perhaps the error of judgment could be made up by planning in advance and ensuring at least a further two year term for Dr Subbarao who has by now understood the role of RBI and can execute a mission consistent with his vision briefly brought out in this New Year message to his colleagues. RBI and Indian Economy deserve a more mature treatment from GOI in 2013!

Fe Comment


RBI has neither understood ots responsblities to make a balance between inflation and growth nor has done anything that serves public purpose. It has called for independence and claims to be judged by public, which can be done through parliament/ Govt. of the day. Yes one thing is sure, it has done during last two years is cultivating a sense of arrogancy.It is therefore suggested that no I.A.S. officer is appointed at a constitutional posts and only technocrates be made in-charge if possible from within.


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