It is not a secret that my relationship with Dr. Rangarajan is one of Guru and sishya. Dr. Subbarao, my distinguished successor at the RBI, said as much in his speech delivered at the book release event at Chennai a few weeks ago.

“Generations of students — many of the achievers in their own right — admire him as their teacher. Dr. Y.V. Reddy, a former Governor of RBI, has told me several times that Dr. Rangarajan is his esteemed Guru and that he honed his understanding of practical economics by working with him. Many, many more acknowledge Dr. Rangarajan as a teacher in the Eklavya sense. In that although they were never taught by him directly, they learnt their economics from his writings and speeches,” said Dr Subbarao in his speech.

True nationalist

Dr. Rangarajan is a true nationalist. He spent almost his entire life only in India and contributed enormously. He was not lured by money or positions outside India. Similarly, he devoted his entire life to the public sector and policy issues without getting involved in purely commercial ventures.

Dr. Rangarajan enjoys no pension at all. In fact, accidentally I came to know that Dr. Rangarajan is not entitled to any pension though he served RBI for 15 years. I took up the matter with the government at least to provide a proportionate pension in relation to the minimum service required for eligibility.

Unfortunately I did not succeed. But God as taken care of him after retirement from RBI, as Mrs. Haripriya Rangarajan would have said.

I have an advantage in reviewing the book because I have already expressed my opinion in my memoirs Advice and Dissent : My life in Public Service, comparing him with his successor Dr Bimal Jalan, for whom I have a great admiration and affection.

“The differences and similarities in their backgrounds were reflected in their styles of functioning. Rangarajan believed that there was no practice without theory. He viewed all issues in the light of a deep understanding of theory and a careful analysis of relevant facts and factors. Jalan believed that theory was merely a tool for understanding the reality and so familiarity with the contours of theory as needed was adequate. He was essentially a strategist, with a quick and instinctive grasp of complex realities. Rangarajan believed in deep understanding of systems and liked to drive changes. Jalan addressed the issues on hand and brought about better outcomes as the situations was on warranted and evolved. Rangarajan’s main focus was on improvement of the system and getting over the problems as they arose, while Jalan’s focus was on solutions to problems on hand as well as emerging ones, thus inducing systematic improvements”. ({page 194})

Deft debt management

However, his lasting contribution relates to external sector management. The importance of restricting the short-term liabilities and desirability of a judicious mix of debt and non-debt creating flows and avoiding short-term debt have not been recognised by the global economic community. In fact, the Gudotti-Greenspan rule was anticipated by Dr. Rangarajan.

The Gudotti-Greenspan rule states that a country’s reserves should equal short-term external debt (one year less or maturity) implying a ratio of reserves-to-short term debt of 1. The rationale is that countries should have enough reserves to resist a massive withdrawal of short-term foreign capital.

The book is divided into three parts. Part one ‘RBI and Planning Commission’. Part two is ‘Governor of RBI’ and part three ‘Beyond RBI’ covers the Governorship of the state, the Finance Commission, and as an advisor to the government. This mix of institutions and subjects called for not only a strong theoretical knowledge but more importantly, a public policy broadly defined.

In my view, the Fourth Volume of the History of the Reserve Bank of India between 1981-1997 released a few years ago has not given adequate credit to Dr. Rangarajan’s enormous contribution. In a way, the detailed analysis in the book Forks in the Road enhances our understanding of the period.

The book is bound to have a long shelf-life because it is not only a treatise on money and finance but also development economics in broadest sense.

(The reviewer is the former Governor of RBI)

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About the book
Author: C Rangarajan
Published by: Penguin Business
Pages: 304
Price: ₹699