Will RBI stand up to Chidambaram?

It had to happen. The political imperative, not to mention the exalted ego of finance ministers — honourable exceptions excepted — lead them not only to over-rule economic prudence but also straight into a joust with their tedious minder, that long suffering old maiden aunt — the Reserve Bank of India (RBI).

Thus, the seat has not even warmed up and P. Chidambaram has announced his intent: He will reduce interest rates. And if you think he is telling the RBI “be quiet, Aunty, I am here now and all is well”, well, that’s your problem, isn't it?

He has had some practice, of course, for five long years just in the last eight, not to mention that dream-laced cameo 16 years ago. Interest rates, he has ruled, will do their master's bidding, the master being himself, never mind the realities of inflation and such other pestilences that prefer to go their wayward way because they have a mind of their own.

FM Vs Governor

Well, you might also say, the RBI Governor, he who is mystified by the price of haircuts, has been bowling a little offline for the last three years. But can you really blame him when everyone knows that he has had, as it were, a niggling shoulder injury, namely, an all-too unquestioning belief in the idea that they also serve who print notes for the government — that is, when they are not lending unconscionably to it?

In other words, we are back to another episode of that dreary old play: FM vs Governor. T. T. Krishnamachari started it, and Nehru ended it, forgetting that umpires should not take sides. The RBI became, for 40 long years after 1958, the Finance Ministry’s Gunga Din. ‘Bearah’ , as the British might have bellowed in their clubs. Or, ‘gofer’ as the Americans call it.

Man in a hurry

D. Subbarao — who is realising a bit late in the day that, in the Government’s eyes, the RBI has a collateral purpose, namely, to be the signalman who sleeps on his watch when the trains go off the track and can, therefore, be fulsomely blamed — has a year left in office. He has woken up to this or seems to have, so at least his recent speeches and reports suggest.

We may well ask therefore: Is this going to be his finest hour? Will he stand up or cave in? Will he fight the Hun on the beaches, and on the street; will he never surrender? Will it be an epic battle that takes us back, misty eyed for a bygone era, to Y. V. Reddy vs PC, on those now socially acceptable symbols of permissiveness — the participatory notes?

We will know soon enough because the Finance Minister is a man in a hurry with a job to do — restore growth — and a dream to fulfil. The RBI can mumble on crisply, as it is its wont these days, even if somewhat toothlessly about inflation and supply-side problems.

Short on governance

One big supply-side problem, as even those fledgling TV anchors know, is that misbegotten child of UPA II — mal-governance. The drought of good governance, unlike the monsoon which has an unwritten script, is the daughter of perverse determination: Stay in power, whatever the cost. Such single-minded devotion to your navel extracts a collateral price which is paid in every rupee going less far this month than it did the last. The public is waiting for revenge.

But it is not governance alone that is in short supply. There are the less exalted but other equally debilitating shortages — land, water and electricity, to name just three.

Alas, cheaper, even if not exactly cheap, money will not produce these three things. But a performer hankering for an exit accompanied by a thunderous standing ovation can forget a vital fact: Miracles happen only in Harry Potter books.

The Government is hoping that businessmen will come to its rescue — animal spirits and what not — and is therefore trying to rescue businessmen oblivious to the wag in the crowd who is asking, who is bluffing whom?

The Finance Minister should know the answer because he understands business as well as he does politics: Practitioners of both arts take what they can for now and ask for more later as a reward, usually for having got what they wanted.

Asking for too much

And what of the other major shortage building up — political certainty? Or, its Siamese twin, political uncertainty which is increasing with every passing week?

Indian businessmen, the biggies that is, are like Indian cricketers: They like flat, placid, wickets and, if it’s not asking for too much, underarm bowling, preferably with a tennis ball.

Show them a green-top in windy conditions like the one that is coming up and they send in bowlers to open the innings. Who wants a broken jaw?

Short on governance, short on land, short on electricity and short on water — that would, or should, be enough to deter any minister from undermining national institutions, whose job is to protect the people and not the party alone.

But this is India. Karmanyevadhikaraste ma phaleshoukadachana … are great words but ambiguous in that special Indian way, a Bernoulli trial with a 50 per cent probability of success — which also means a 50 per cent chance of failure.

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