The Hindu Business Line : It’s vintage Y.V. Reddy again

Chennai, Oct. 25 It’s about a year since Dr Y.V. Reddy laid down office as the Governor of RBI. And barring the odd appearance at a seminar or two, he has studiously kept a low profile, while refusing to be drawn into any discussion on current policy and RBI actions.

It was therefore interesting to hear Dr Reddy once again when he was in Chennai to deliver the fourth Guhan Memorial Lecture under the auspices of CAG ( Citizen consumer and civic Action Group). That he hadn’t lost his deft touch was evident in the way he flagged a number of issues in his speech. He then tackled questions from the audience with customary aplomb — using a combination of forthrightness and diplomacy and topping it off with witty repartees.

Starting off in his usual self-deprecatory way, after the hosts had given a glowing introduction, he said that since he had received undeserved blame earlier, he was OK with the ‘undeserved praise’ that he was getting now.

When a questioner wanted to know if there was some ‘insider trading’ being done by monetary policy practitioners, a lesser man might have taken offence to the insinuatory nature of the question. Dr Reddy handled it gracefully. Rejecting any charge of ‘insider trading’, he categorically said that such a thing if it were done would be a fraud. Then he referred with amusement to the lot of second guessing and the bets being taken about the moves that he made during his tenure as RBI Governor, and brought the house down with this quip, “We ourselves didn’t know what we were going to do.”

He pointed out that the Credit Policy moves were often made in an atmosphere of uncertainty and there were often last minute changes based on events that happened elsewhere in the world.

When asked whether the independence of the central bank was contingent upon there being a strong Governor, and whether the independence could be institutionalised, the response was – “An independent central bank doesn’t necessarily ensure financial stability.”

He then conducted a mini tour de force of the prevailing systems across various countries. Pointing out the experience of the Swiss Central Bank where the independence is enshrined in their constitution and the Central Bank Governor could remain free of all pressure to the extent that he need not even take any phone calls, he said this may not be suitable for India. Reiterating that continuous dialogue and co-ordination with the political executive/ Finance Ministry was the best way forward, he ended with this, “The RBI Governor is independent, to the degree permitted by the Government!” And then he recalled one more jocular quip that he had made when he was a Deputy Governor to this effect, “Autonomy is never granted. It is only grabbed!”

And when another questioner wanted to know when the RBI would withdraw its accommodative policy stance, he parried that neatly, saying, that he would not engage in astrological predictions! Touché!

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It’s vintage Y.V. Reddy again