NEW DELHI/MUMBAI: The government on Monday appointed finance secretary Duvvuri Subbarao as the new governor of the Reserve Bank of India (RBI). He will succeed Dr Y V Reddy, whose term ends on September 5. “The government has decided to appoint D Subbarao as the next governor of RBI,” finance minister P Chidambaram told reporters. Mr Subbarao would be appointed for a three-year period. He may, however, be considered for reappointment for another two years, as the RBI Act provides for appointment of a governor for a period of up to five years. This puts an end to speculation over who would take over the reins of the central bank from Mr Reddy, whose tough but sure handling of monetary policy has served India well in these times of global financial turbulence. RBI deputy governor Rakesh Mohan was among those who were in active consideration for the post. If he chooses not to continue at RBI, a younger professional economist could well take his place. Chief economic advisor Arvind Virmani is a likely candidate. An old RBI hand and the current vice-chancellor of Pune university Narendra Jadhav is another.
2008 September RBI Governor
2007 May 1 Finance Secretary
2005 March 2 Secretary to Planning Commission
1990 June 4 Joint secretary Planning Commission
1988 July 15 Director in ministry of finance & company affairs
1972 IAS Officer
Prior to his appointment as finance secretary in April 2007, Mr Subbarao served as secretary to the Prime Minister’s Economic Advisory Council headed by Dr C Rangarajan. A brief stint as secretary, department of economic affairs, filled the gap between these two posts. He topped the civil services batch of 1972, as he did in most exams during his academic career, and worked in Andhra Pradesh, including a stint as finance secretary there.
Exclusive: Subbarao to ET
Within minutes of landing from his tour of Brazil, ET spoke to the jet-lagged finance secretary, who was still taking in the news of his appointment as RBI governor. “I have just got the news; it is a big responsibility. I can only say I will do everything to carry out my responsibility effectively.'' Although Mr Subbarao declined to elaborate on any issue in particular, the biggest challenge would be to keep inflation under check. He maintained that he did not have any formal indication of his new responsibility although he was willing to take up the challenge.
Five years ago, when the then governor Bimal Jalan left RBI, well before the end of his extended term, he told his successor Yaga Venugopal Reddy that he was leaving when the going was good and it could be Mr Reddy’s turn to weather a storm. Duvvuri Subbarao also takes over as the 22nd RBI governor at a critical time when there are a lot of headwinds ahead. The macro-economic situation is challenging with the slowing down of growth and inflation worries. He will have to get into action straightaway with the next policy review in October. The other major test would be the review of the opening up of the banking sector to foreign banks and also approval of fresh bank licences, including to corporates
According to officials who have worked with Mr Subbarao, he appears to be the best choice considering his macro-economic background, his experience as a fiscal manager, professional and balanced approach and the ability to be a team man. He is also quite accessible, a trait that ET can vouch for since his days as a columnist for the newspaper. But the way the appointment was stretched almost to the wire has left many in Mint Street, which houses RBI, bitter. Normally, the choice of RBI governor is not a controversial one and is announced well before the end of the incumbent’s term. RBI deputy governor Rakesh Mohan, who was earlier the economic advisor to the finance minister, and secretary economic affairs in the finance ministry was a contender. But then there was always the shadow of his exit from the finance ministry half-way through his stint, only to join RBI as a deputy governor. The feeling within the officialdom is that he may well be deputed to either the World Bank or the IMF as an executive director. One senior official, on the condition of anonymity, said an extension to Mr Reddy was mooted, but did not find favour with the finance minister. The extension was mooted so as not to upset the applecart in a difficult year and time, especially with the polls looming ahead. Within the government although Mr Reddy did have a lot of differences on policy issues with the finance ministry, there is a belated acknowledgement about his judgement calls on the economy. Yet, the feeling has persisted that Mr Reddy was being unduly conservative on many issues although unlike in the case of the previous Sebi chairman, the communications lines were never closed. Mr Subbarao, in contrast, is reckoned to be less hesitant on some key structural changes proposed for the central bank, making monetary policy its sole focus, divesting other functions such as public debt management and supervision of the banking system. With Mr Mohan’s candidature also not meeting with approval, the obvious choice was Mr Subbarao. He was, of course, backed by Dr Rangarajan. Mr Subbarao studied physics at IIT and was one of the first IIT products to join the civil services. Subsequent to joining the IAS, he did his MS in economics from the Ohio State University (1978) and was a Humphrey Fellow at MIT during 1982-83. He also has a PhD in economics.
6 months ago