‘Price stability is important for economic growth,’ said Dr. D. Subbarao, former Governor of the Reserve Bank of India (RBI). He was speaking at the 12th CPPR Quarterly Lecture held in Hotel Grand, Ernakulam, on 9 th August. The lecture was based on his new book, ‘Who moved my interest rate?’.

Dr. Subbarao, the 22nd Governor of the RBI, shared his experiences as the head of India’s apex bank for five turbulent years, starting from the global financial crisis in 2008 to taper tantrum in 2013. Though India was immune from the Asian crisis, its integration into the globalised economy from the financial year 1997-98 to 2007-08 made it prone to the 2008 crisis. He said that during his tenure, his policies were criticised by both the hawks and doves.

‘I was blamed for killing growth by raising the interest rates,’ he added. During the period of crisis, when he coordinated with the Centre like all other central bank governors did, he was flaked for surrendering the governor’s power to the government. It was only after five years at the RBI that his policies were recognised and people gained confidence in him.

Commenting on the inflation versus growth debate, he held the view that the youngsters were more concerned of growth and the middle-income group gave priority to inflation. On financial inclusion, he stated that albeit Ernakulam being the first financially inclusive district in the country, the people still depended on moneylenders.

‘In such a scenario, we need banks that not only provide saving facilities but also deal with remittances, micro insurance and credit services,’ he added.

Supporting the recent on tap licensing announced by the RBI, he remarked that India should have more number of banks catering to the needs of people belonging to different income groups. He claimed that certain government policies like the 7 th pay commission report could lead to inflation. As a result, the RBI would be forced to intervene in the market by raising interest rates to control inflation. Reflecting on the Monetary Policy Committee (MPC), he noted that the foremost priority of the new governor should be to institutionalise it. On the merging of various public sector banks, he said there was nothing to worry, as the merger would not exhibit any effect on the Non Performing Assets (NPA).

Dr. Subbarao concluded the talk by stating that in his book ‘Who moved my interest rate?’, he had tried to demystify the RBI, to do away with the central bank’s image as a killer of growth.

Dr. Martin Patrick, chief economist of CPPR moderated the session. Ms. Deepthi Mary Mathew, research associate, CPPR-Centre for Comparative Studies hosted the event.

About Dr D Subbarao

Dr. D. Subbarao has served as Governor of the RBI for five years from 2008 to 2013. India was the least affected country during the 2008 global financial crisis. This was achieved mainly due to the policies pursued by the RBI under his guidance. Prior to his appointment as RBI Governor, he has served as the Finance Secretary to the Government of India. In a career spanning 35 years, he has held various positions in the State Government of Andhra Pradesh and in the federal government of India. He was actively involved in formulating and implementing economic and social sector reforms at the national and sub national level. Currently, he is a Distinguished Visiting Fellow at the National University of Singapore.

To view the complete lecture click here: “Demystify the RBI” Dr D Subbarao speaking at CPPR’s 12th Quarterly Lecture 

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