Economic policy failure, uninterrupted

Economic policy failure, uninterrupted: That’s been a recurring theme, from the days of Indira Gandhi to the ways of the RBI under D Subbarao — a story of fiscal subterfuge and monetary policy neglect of inflation...

Excerpts:

"The fact their old adversary, the government, which was leading them by the nose, was completely overlooked. The mode was more justificatory than combative, accommodative than adversarial. It was as if the RBI had collectively decided to bury Reddy’s ghost. In effect, the RBI became the most articulate advocate of fiscal expansion and monetary laxity.

In that major sense, the years 2009-11 were amongst the most inglorious years of the RBI. Soon after he got his second term in September 2011, Subbarao started becoming critical of the government.

He spoke repeatedly about inflation, growth, politics, the laws of economics and the laws of physics which they were supposed to resemble but didn’t. Reams have been written about this sudden turnaround. They do not, however, take away from a simple fact: he was trying to shut the stable door after the horses had bolted.

The economy went into a steep downward spiral from which it is still to recover. Not to put too fine a point on it, despite his best intentions and efforts, it must be said that Subbarao failed to do his job. He allowed both prices and bad loans to rise, thus failing on the macro side as well as the regulatory side.

These two are the most important tasks which the RBI is charged with. It may sound very harsh but to the extent that a person must be judged by the outcomes he delivers, it is true. You judge a batsman by the number of runs he scores and a bowler by the number of wickets he takes. Nothing else matters. " 

Monologues in wilderness

Apropos “Economic policy failure, uninterrupted” (The Hindu Business Line, Book Extract, March 27), even after discounting the freedom historians and journalists have (TCA Srinivasa Raghavan is Two-in-One plus!) in timing their responses and the right they can exercise in being selective about subjects, one has to concede that the conclusions arrived at deserves to be accepted as a guidance for sorting out the relationship issues between GOI and RBI.

 Even before reading the book “Dialogue of the Deaf”, going by the abundance of the author’s experience as journalist fortified with his association with editing the RBI’s History,  we can have a feel of the rich content of the book which could become a source of reference for future historians.

It is always easier to be wiser after the event. While being judgmental about Dr Subbarao’s performance during the first half of his total 5 year term, one has to ponder over the circumstances in which he got selected for the top job at Mint Road by the then FM Chidambaram.
Going by Subbarao’s own revelations in his memoirs and other circumstantial evidences, FM opted for an amenable RBI Governor. Most of the Governors and Deputy Governors who come to RBI from outside, some too soon and some after some time, undergo a metamorphosis and start talking RBI language is a blessing that keeps
India’s central bank going despite all efforts, internal and external, to destabilize it.

Unless policy makers take time to read and understand the spirit of monologues like this, they will remain in the wilderness, again used only for reference purposes by scholars and historians.

M G Warrier, Mumbai