Subbarao bids adieu

In his swansong, Reserve Bank of India Governor Duvvuri Subbarao laid bare his differences with Finance Minister P Chidambaram, but predicted that one day the lawyer-turned-politician will thank the bureaucrat. Government meddling in the affairs of the central bank should be avoided and the RBI governor should appear before a parliamentary panel twice a year, as is the case in advanced nations, to ensure the autonomy comes with accountability, Subbarao said. “I do hope Finance Minister Chidambaram will one day say, ‘I am often frustrated by the Reserve Bank, so frustrated that I want to go for a walk, even if I have to walk alone. But thank God, the Reserve Bank exists’,” Subbarao told the audience at the Nani Palkhivala Memorial Lecture.
The recent rupee fall, the governor said, was more because of the high current account deficit (CAD) — the excess of spending overseas than earnings — for three years. As a nation, India failed to utilise the excess liquidity to set its house in order, and blaming the Fed Reserve now would not help.
Last October, Chidambaram had famously said, “If the government has to walk alone to face the challenge of growth, then we will walk alone”. The FM made these remarks in the context of RBI’s seeming reluctance to cut rates. Although the governor and the minister have spoken in conflicting language when it comes to economic policies, Subbarao is for the first time publicly naming the minister to assert that his frustration with monetary policies may well turn out to be wrong in the eyes of history.