‘Ensure Benefits Of Growth Are Shared’: Former RBI Governor Duvvuri Subbarao

Your book covers critical moments in your career—from the 2G spectrum controversy to pressure from Pranab Mukherjee’s finance ministry for rosier growth estimates. What prompted you to put this out?

Many people, especially students, urged me to write about my IAS [Indian Administrative Service] career.

Firstly, I wanted to see if I could write an interesting enough story. I joined the IAS in 1972, a different era and context. Whether today’s youngsters would relate to my story was uncertain; some stories might seem vain, but beyond that would they find value?

Secondly, civil service memoirs are a crowded genre with many people writing books of varying quality. A standout memoir usually aligns with the economic and political situation of the time. I was not sure I could meet those standards.

Lastly, I had not kept any notes, which meant that as I jogged my memory to write there was a risk of selective memory—highlighting achievements and downplaying failures. For all these reasons, I had misgivings. However, during the Covid-19 lockdown, I started jotting down some notes. This evolved into a book. I hope people find it interesting, instructive and of some value.

What made you choose the title Just A Mercenary?

I considered a few alternatives but settled on this one because it best reflected my dilemma at this stage of my life and career. We all complain about our country, its inequalities and lack of meritocracy. I complain too. But when I look back objectively, I see that I have gained a lot from this country. I attended Sainik School with a government scholarship, received an IIT [Indian Institute of Technology]education with another scholarship and served in the IAS  due to a merit-based entry. I became governor of RBI [Reserve Bank of India] towards the end of my career. So, I have had many opportunities to contribute.

The question that runs through my mind now is whether I have given back enough to society. When I look back, I see that I tried to do my best in every role I had. But was I driven by a bigger calling to give back to society or was I just performing for the money? Ultimately, I hope readers of the book will decide whether I was just a mercenary or something more.

Between 2008 and 2024, there have been four RBI governors—two civil servants and two career economists. While former bureaucrats managed to complete their tenures, economists did not. Do you think governments may now prefer civil servants as RBI governors?

We have had governors from a wide variety of backgrounds, including academics, career economists and bureaucrats. I think they have all proven equal to the job, depending on the economic situation they were called upon to manage and the crises that the country faced. Therefore, I would not make any inference that a governor from one background is inherently better or worse than another.

The RBI is considered one of the toughest regulators in the world. Many players have been calling for the regulator to be a bit lenient. What is your take?

First, let me comment on your preface to the question. When you say the RBI is one of the toughest regulators, I am not sure I agree with you.  Second, it is in the very nature of business that entities being regulated often have grievances against the regulator. However, the organising principle of regulation is that the regulator has systemic knowledge that individual entities do not possess. This systemic knowledge is crucial because regulatory institutions have a broad understanding of the industry. So, it is quite natural for regulated entities to have grievances. But I would not necessarily take that to mean the regulator should become more lenient.

At one point in your book you say states must acknowledge that the fiscal formula is not against them. Given the squeeze many states have seen in the post-goods and services tax (GST) regime, how do you respond to their complaints?

As political entities, it is natural for state governments and chief ministers to have grievances against the Centre. Conversely, the central government often pleads inability to meet states’ demands.

We appoint the Finance Commission every five years to find an equitable formula for distributing the resources between the Centre and the states. One of the key elements of this formula is the shareable pool of taxes which includes an elaborate system of cross-subsidisation.

However, the question is whether we are hitting the limits of this cross-subsidisation. An additional complication is that in two years we are due for delimitation. If we follow the current formula, southern states will lose parliamentary seats to northern states. Reconciling this is an intense political problem that requires enlightened leadership both at the Centre and in the states.

Questions have been raised about the kind of growth India is seeing due to sluggish consumption and income inequality. Do you think the quality of growth should be questioned?

I would think so. Where is it going and what do rising inequality and unemployment figures mean? As much as many of those numbers are questioned, we cannot deny that there is an unemployment problem. We need not only growth but also to ensure that the benefits of growth are shared.

Whether that is happening today is questionable. People have questioned the growth rate itself. It is not 8%, the underlying growth is 6.5%. But then, how widely or equitably shared is it? That is 
the question.

You have been a career bureaucrat and have seen the evolution of civil services. The Prime Minister’s Economic Advisory Council member Sanjeev Sanyal recently questioned the demand for civil services. How do you look at this comment?

The IAS certainly needs reform in terms of recruitment, career management, training, specialisation, lateral entry, incentives and penalties. Sanjeev Sanyal has pointed out that young people waste a lot of time and energy trying to get into the civil services. While I agree with the diagnosis of the problem, I do not agree with placing the blame solely on the candidates.

Attempting the civil service today typically takes about 10 years because candidates get six attempts. The more attempts they make and the more they invest in preparing, the more they feel compelled to continue due to the sunk cost fallacy which affects us all. Therefore, you cannot blame the candidates, you must blame the structure of the exam.