The Hindu Business Line : For the RBI Governor, a baptism by fire

Exciting times: (From right) The RBI Governor, Dr D. Subbarao and his deputies Mr. V. Leeladhar; Ms Usha Thorat; and Dr Rakesh Mohan on their way to announce the Mid-Term Review of Annual Policy for the year 2008-2009 in Mumbai on Thursday.-

Ashoak Upadhyay
Remya Nair

Mumbai, Oct. 24 Dr Subbarao is very conscious of the tumultuous times in which he has assumed charge of the Reserve Bank of India.

When told that he had walked into a fire as it were, he commented wryly, “Not a fire, an inferno.”

That baptism by raging fire left him no time to grow into the job, he says but to his credit, he has handled the first 50 days with flexible policy play, meeting the challenges thrown by the global turbulence in India’s way.

“The stereotype has it that the Credit Policy announces policy. Had the real world cooperated, we would have done it that way. But under the circumstances we couldn’t have waited for the mid-term review.”

Yet the review has merits, he points out; it helps disseminate the RBI’s ways of thinking.

So how does the concern about excess liquidity with non-food credit at 29 per cent and money supply over 20 per cent square with higher Government spending and the RBI’s own frequent injections of liquidity?

“Yes, we have targeted numbers in the review, but we are not running Monetary Policy to achieve some numbers; we look for price and financial stability…and growth.”

He warms up. “The perception that credit has choked isn’t correct. It has been growing, the numbers prove that.”

The mid-term review stresses the need for asset quality. Does this mean specific instructions to banks about lending to specific sectors. No, he replies. The signals from provisioning norms are enough.

How does he see the next two quarters panning out? Suppose the US spins into recession?

“We would be deluding ourselves to think India would not be affected,” he says.

“Even after the financial system returns to normalcy, recession will have a deep impact on India and the emerging world.”

So the inferno will still rage.

Steep learning curve

“I am still learning on the job,” he says with modesty.

“People are doing unconventional things… Who would have thought the American Government would have taken shares in banks. In these exciting times that learning curve must be very steep."

He smiles.

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