Inflation warrior lays down arms

Inflation warrior lays down arms

It’s not often that you hear a Reserve Bank Governor speaking about poor, but Duvvuri Subbarao who steered the apex bank for five years had...

Duvvuri Subbarao goes into history as the first Reserve Bank chief, who put the interests of poor before those of the country’s political bosses; he demits office today

Hyderabad: It’s not often that you hear a Reserve Bank Governor speaking about poor, but Duvvuri Subbarao who steered the apex bank for five years had steadfastly put the interests of poor ahead of others, and directed the monetary policy towards containing inflation which, according to him, hurt the financially-vulnerable sections the most.

Subbarao, who can be described as an inflation warrior for his tight monetary policies, demits office today. He always defended his policy saying that inflation is a ‘regressive tax’ and his focus was on containing prices in the interest of the vast numbers of poor.

Hailing from Eluru in West Godavari district, he topped Civil Services Examination in 1972 after completing MSc in Physics from IIT-Kanpur. He was assigned to the Andhra Pradesh cadre where he held at various senior positions including that of Finance Secretary between1993-98. Subsequently, he was shifted to the central government cadre where he worked as Union Finance Secretary before moving to Mint Street as RBI Governor in September 2008.

His stint at the apex bank began on tumultuous note with financial crisis engulfing global economies. It was the worst economic crisis world had witnessed since the 'Great Depression' of 1930s. But India came out largely unscathed from it mainly because of the sound fundamentals of the banking system and strict supervision by the RBI.

But what Subbarao will most be remembered for will be the tough monetary stand that he took during the last one and half years when inflation was rising on one hand and economic growth stumbling on the other.

Under his leadership, the RBI raised policy rates 13 times between March, 2010 and October, 2011, testing the government's patience. RBI's tough stance brought down wholesale inflation from double digits in 2010-11 to around 5 per cent now and core inflation declined to around 2 per cent.

Subbarao's unrelenting focus earned the ire of those in the government with Finance Minister P Chidambaram even remarking once that if the government has to walk the path of growth alone, it was prepared to do so. Observers perceived the differences between the government and the RBI as not a healthy sign especially when the economy was under strain.

The soft-spoken and affable RBI Governor vented his feelings towards the end when he said the problem lay more with the government and domestic factors than with problems outside. He even quoted a former German chancellor to say that Chidambaram would 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's critics say his policies resulted in the moderation of economic growth to decade's low of 5 per cent in the last fiscal.

Defending his policy actions, the 22nd RBI Governor said on many occasions that growth moderated, but to attribute all of it to tight monetary policy would be inaccurate, unfair, and importantly, misleading as a policy lesson."India's economic activity slowed owing to a host of supply side constraints and governance issues, clearly beyond the purview of the RBI," Subbarao had emphasised several times. While there were brickbats for his tight monetary policy that his critics called hawkish, there were any number of admirers for his stance they considered independent of the government, displaying the central bank's autonomy.

(With inputs from PTI)

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