Former Governor Subbarao exposes UPA government influence on RBI autonomy

In his recent memoir titled 'Just A Mercenary?: Notes from My Life and Career', former RBI Governor Duvvuri Subbarao shed light on the government's pressure on the central bank to soften interest rates and present a more optimistic outlook on growth.

Subbarao recounted instances during his tenure when the finance ministry, under Pranab Mukherjee and P Chidambaram, exerted influence on the RBI to align its policies with the government's objectives. He expressed concern over the lack of understanding and sensitivity within the government regarding the importance of central bank autonomy.

During discussions with the finance ministry, Subbarao noted instances where pressure was exerted to present higher estimates of growth and lower estimates of inflation to boost market sentiments. He recalled a specific incident involving Pranab Mukherjee, where officials contested the RBI's estimates with their own assumptions, urging the central bank to project a higher growth rate and a lower inflation rate.

Subbarao highlighted his firm stance on maintaining the RBI's independence and professional judgment, refusing to deviate from objective assessments to appease government demands. He stressed on the importance of consistency between economic projections and policy stances, stressing that altering growth and inflation estimates would undermine the central bank's credibility.

The former RBI governor also detailed his interactions with Chidambaram and Mukherjee, noting their persistent advocacy for softer monetary policies. Despite their differing approaches, both leaders consistently pushed for lower interest rates, creating tensions between the government and the central bank.

Subbarao's memoir provides a candid account of his career journey, reflecting on the challenges and lessons learned throughout his tenure. From his early experiences as a sub-collector to his role as the governor of the RBI, Subbarao offers insights into the complexities of policymaking and the dynamics between government and financial institutions.

(With PTI inputs)