Just A Mercenary Who Steered Key Economic Decisions & RBI In Turbulent Times

Duvvuri Subbarao has been a bureaucrat, an economist at the World Bank, and the RBI governor and has made a larger and lasting impact in each of these roles.

He has been a part of the team which worked on formulating and implementing the 1991 economic reforms, has steered the RBI through turbulent times of financial crisis and is remembered as the RBI governor who boldly stood up for its autonomy.

Ahead of the launch of his upcoming book ‘Just A Mercenary’, Deccan Chronicle spoke with him to unravel the theme of the book and to get a lot of interesting anecdotes from his illustrious journey through the echelons of power both at the state and the centre for our audience.

You have been a bureaucrat, economist at the World Bank, and RBI governor. Which of these roles you enjoyed the most and in which role do you think you made a larger and lasting impact?

As an IAS officer, I served at the state level in Andhra Pradesh and in the Ministry of Finance in Delhi. I was in the World Bank for over five years where I was involved in assisting developing countries - first in Africa and later in East Asia - implement public finance reforms. At the end of my career, I had the privilege of serving as the governor of RBI. Each of these jobs had its charm and its own challenges. As an IAS officer, you have the unique opportunity to formulate and implement public policy and directly see the impact of your work. As I say in the book, there are few other jobs in the world that can match the ‘thrill’ of being an IAS officer. The World Bank job was mind expanding in many ways. I learnt many things including the important one that how a country gets to the best practice in public policy is a function of its unique culture and administrative traditions. As regards the RBI job, as I’ve said at several forums after stepping down as governor, what the RBI does has an impact on people’s everyday lives, much more than they realize. So, the answer to your question is that I enjoyed all my assignments, but more in retrospect than in real time.

How was it being a part of the team which worked on formulating and implementing the 1991 economic reforms? What specific responsibility did you shoulder in the team?

I must admit I was not part of the core reform team but was involved in some of the fire fighting. For two years before the 1991 blitzkrieg reforms, as a director in the finance ministry, I was handling balance of payments (BoP). I saw first-hand, on my direct watch, the rapid decline in our forex reserves and how we were reduced to scraping the bottom of the barrel. On many occasions, to maintain forex liquidity, we even had to play the clock – borrowing in Tokyo in the evening to repay in New York, only to reverse the deal in the next half day. As the BoP situation came to a boil in 1990, the caretaker government of Chandrashekhar had initiated a dialogue with the IMF but the IMF was not willing to commit assistance until a regular government was in place. The Japanese came to our rescue by providing bridge finance. As joint secretary in charge of Japanese assistance, I had the responsibility of negotiating this lifeline to get us through those critical months. I also had the dubious distinction of signing away the papers that mortgaged our gold for a temporary loan.

Are you satisfied with the way these reforms have shaped our current fiscal policies and choices? Is there something that could have been done better in due course of these reforms?

The 1991 reforms were truly transformative; they changed the course of our economic history. Our reforms were also unique in that we implemented them in a democratic system and a federal structure. The reforms of the 1990s were largely concentrated in the centre’s domain – industrial delicensing, import decontrol, exchange rate flexibility and financial sector liberalization. They could be implemented by the centre without wide consultations. It used to be said, only partly in jest, that for much of the 1990s, reforms did not travel beyond the North Block in Delhi which houses the finance ministry. But by 2000s, we graduated to second generation reforms focussed on factor markets – land and labour and taxation and public-private partnerships which required not just consultation with states but even their consent and active cooperation. Given the diversity of interests, debate, dissent and even acrimony are par for the course. Even so, we implemented the GST in 2016 which as late Finance Minister Jaitley said is a tribute to our federalism. Let me say in conclusion that we must not let reforms become hostage to politics.

You have steered the RBI through turbulent times of financial crisis – global financial crisis erupted within days of your taking over the role, followed by inflation 2009-11 leading to taper tantrums (sharp depreciation of rupee). How did you manage to steer through these successfully?

The five years I was at the helm of the RBI (2008-13) were truly turbulent. The global financial crisis erupted just a week after I assumed office. Just as the crisis was receding, we were hit by an extraordinary bout of inflation which segued into a battle against a crash in the rupee in the face of what were termed taper tantrums. All these crises, including the stubborn inflation in some sense, were consequences of financial globalization. Globalization, as we know from experience, offers immense rewards but it also imposes ruthless costs. I was certainly challenged in managing these crises but you must remember that there was behind me a great institution – the RBI with immense experience and expertise in handling crisis situations like this. It was that support and confidence which helped me navigate these challenges.

You are remembered as the RBI governor who boldly stood up for its autonomy. What advice would you give to the current crop of civil servants and people holding public offices to deal with attempts to undermine the autonomy of public institutions?

Thank you for saying that. It means a lot to me especially because when I was parachuted into the RBI form the finance ministry in Delhi, the talk of the town was that the government was dispatching one of its trusted civil servants to the central bank because he would act as per their bidding. I realized that the only way I could establish my credentials was by acting according to what I thought was the best public interest. It wasn’t as if I wasn’t sympathetic to the government’s point of view. I heard them as indeed I heard all stakeholders and acted as per my best judgement.

It will be presumptuous on my part to give any advice to anyone but I do want to say that the pecuniary and professional integrity of our public officials and the intuitional integrity of our public instructions will be critical to India becoming a developed country.

We are aspiring to be a trillion-dollar economy in the next few years. What are some of the crucial things that need to be fixed for us to reach there?

The agenda for becoming a five trillion dollar economy is huge and is by now also familiar fare. We need not rehash all that here. But I only want to say one thing if only because its importance is not widely appreciated. Mere growth will not do. We need to ensure that the benefits of growth are widely shared which is to say that we need to focus on reducing inequality. Inequalities are morally wrong and politically corrosive. They are also bad economics. The huge consumption base of the bottom half of our population is our biggest growth driver. If they earn more, they will spend more which will in turn spur more production, more jobs and higher growth. If we can’t put more incomes into their pockets, it will be a huge missed opportunity.

While on the subject of inequality, I must note that it has more dimensions than just income. We need to focus on education and health inequalities. World Bank Research shows that in poor societies education has been the route for upward mobility across generations. If additional efforts are not made to improve the quality of education in the vast hinterland of the country, an entire generation of children might forfeit the opportunity to move up the income ladder. Likewise, poor children suffer learning disadvantages because of malnutrition and burden of disease which calls for improvement in public health and primary health care.

What is the central message of ‘Just A Mercenary’?

At the risk of sounding boastful, I must say that by relative standards, I had a fairly successful career. So most people think, my career went in an upward sloping straight line from start to finish. The reality was far from that. There were ups and downs, hopes and despair, successes and setbacks. And I was on a lifelong learning curve. I want young professional aspiring to move up their career ladders to learn from my story that these fluctuations are inevitable. A successful person, as they say, is not one who never fails but who, after failing, learns from his failure and moves on.

While it is (Just A Mercenary) an attempt to identify your motivation throughout your life and journey as a civil servant, have you been able to finally place a finger on what motivates/motivated you?

As it happens, ‘no’. A mercenary, as I understand, is someone who goes to fight a war just because he is being paid for it. He has no commitment to any larger cause. I am quite clear that all through my career, I’ve tried to do my best. I am conscious too that my best may not have been good enough on occasion. But the question that constantly runs in my mind is what motivated me. Was it just a sense of duty – an obligation to do your best just because you are getting paid for it? Or was I driven by a higher calling—the need to give back to society for all that I have received? In short, was I just a mercenary or was I more? The answer will perhaps elude me forever. I will leave it to the readers to decide.

What are your thoughts on IAS as a steel frame of our nation’s governance? Does ‘Just A Mercenary’ provide us with some perspective on its future?

A couple of years ago, I published an op-ed in a major newspaper under the title: “Has the IAS Failed the Nation?” where I lamented the intellectual and moral decline of the IAS. Arguably, this negative stereotype view is shaped by a minority of officers who have gone astray, but the worry is that that minority is no longer small. I got a lot of hate mail for my criticism saying that I was vilifying a service that had in many ways defined my life and career. But it is because I am hurt by fall of the IAS from its lofty pedestal that I expressed my sorrow. That article is reproduced in the book. I firmly believe that a country of our size and diversity still needs a generalist service like the IAS but the service needs to be reformed and even reinvented in many ways.

I am sure that the book would provide the reader with a lot of interesting anecdotes from your illustrious journey through the echelons of power both at the state and the centre. Would you share a couple of them for our audience?

I joined the IAS in 1972. It was a different world, a different milieu in terms ofthe challenges of administration and the logistics of administering. Many of my storiesmay therefore be quaint. But, interesting? We will only know from reader reaction to the book. But since you ask, let me cite just two stories.

The first is about the 2G scam. As Finance Secretary in Delhi I was involved in decisions relating to the pricing of 2G and 3G spectrum although I was not involved in the allocation of licences which was handled in the Department of Telecom and has been the subject matter of a criminal case. Nevertheless, I had to appear before the parliament standing committee, the JPC and also had to depose as a witness before the CBI Court. I thought I would be hailed as a hero for trying to safeguardgovernment’s revenues but after all these probes, I was made to feel like a villain!

Another interesting vignette of my career was when in mid-1980s, chief minister NTR specially chose me for his Arrack (Liquor) Bottling Scheme. I was crestfallen by this turn in my career. You join the IAS with aspirations of changing the world and you are consigned to bottling liquor? But as it turned out, that assignment taught me may lessons including the important one that it was vain on my part to believe that I was entitled to certain ‘prime postings’.