New Governor RBI and the Challenges

Governor RBI is a different game altogether. The IMF experience and his short stint in Government may stand him in good stead but the nuances and intricacies involved while formulating policies as a Central Banker without much of independence and without displeasing the mandarins of ministry of Finance are really complicated. Dr Reddy's period was some what smooth and he had the skill of communication and diplomacy to have his own way of handling Central banking policies and the Ministry of Finance.Mr Subbarao came at a period when the global Financial crisis was looming large and his whole attention was to insulate the economy from the damages of the financial crisis the world experienced from Lehman breakdown.The political stability which helped Dr Reddy a lot to have his own way of doing things was unfortunately not there for Dr Subbarao and he had to take some tough policy stand much against the wishes of the Government. The saying that when problems they always come in battalion has been well proved and  Dr Subbarao unmindful of the displeasure of the Government stood firm on his policy stand to fight inflation first and then support growth. Some of the moves of the Government widened the Gap between the RBI and the Govt and RBI and the Banks distorting the whole confidence in the financial system.Many have warned the consequences of having  such a disturbed relationship and repeatedly advised through media to have a coordinated approach, but they have all fallen in deaf ears and the economy is in a mess now.These are perhaps some of the pinpricks the new Governor may not be familiar with and more than the sound knowledge of economics and experience in the field of finance, handling politicians is an art by itself and this is where the new Governor has to worry about. Herein lies the success of any governor. Wish the new Governor all the best.

Dr.T.V.Gopalakrishnan