Ex-RBI Governor Makes Shocking Claim, Says Pranab Mukherjee, P Chidambaram Pressured RBI To Present Rosy Picture Of Economy

Former RBI Governor Duvvuri Subbarao claimed that the finance ministry under Pranab Mukherjee and P Chidambaram used to pressure the RBI to soften interest rates.

New Delhi: Former Reserve Bank of India Governor D Subbarao has made some shocking claims in his book where he recalled his stint with the RBI and interaction with the Finance Ministry. Subbarao claimed that the finance ministry under Pranab Mukherjee and P Chidambaram used to pressure the RBI to soften interest rates and paint a more optimistic picture of growth to bolster sentiments.

"Chidambaram typically argued his case like the lawyer that he so eminently is, while Mukherjee was the quintessential politician," Subbarao wrote.

In the book titled 'Just A Mercenary? Notes from My Life and Career', Subbarao wrote about the 'little understanding and sensitivity' in the government on the importance of the central bank's autonomy, reported PTI

"Having been both in the government and in the RBI, I can say with some authority that there is little understanding and sensitivity within the government on the importance of central bank autonomy," he wrote in the book.

Subbarao served as finance secretary from 2007 to 2008 before assuming the position of RBI governor for a five-year term that started on September 5, 2008, just days before the Lehman Brothers crisis erupted.

In the book, he recalled that pressure by the government was not confined to the Reserve Bank’s interest rate stance. On occasions, this pressure even extended to urging the RBI to provide more optimistic forecasts of growth and inflation, diverging from RBI's objective assessment, he recalled.

Subbarao noted that suggestions were made that the RBI should project a higher growth rate and a lower inflation rate to share responsibility with the government for 'shoring up sentiment'. He said that there was a time when he was invariably discomfited and annoyed by this demand that the RBI should have to become a cheerleader for the government.

The former RBI governor pointed out that he used to take a firm position that the Reserve Bank cannot deviate from its best professional judgement just to doctor public sentiment.

Who is Duvvuri Subbarao?

Duvvuri Subbarao started his career as a sub-collector of the Parvathipuram sub-division in north-coastal Andhra Pradesh way back in 1974. In 2013, he became a governor of the Reserve Bank of India amid a fierce exchange rate crisis. Subbarao is currently a senior fellow at the Yale Jackson School in the US.

His recent book 'Just A Mercenary? Notes from My Life and Career' recalls his journey of 74 years. The consists of multiple stories on hopes and despair, his successes and setbacks, his mistakes and misdeeds, and the lessons he learnt along the way - with rare candour and honesty.