Former Finance Secretary, Arvind Mayaram, Rejects Subbarao's Claims of Government Pressure on RBI

In the latest exchange of verbal volleys ahead of elections, Arvind Mayaram, former Finance Secretary, has dismissed allegations made by former RBI Governor D Subbarao.

Subbarao had earlier accused the Finance Ministry during Pranab Mukherjee and P Chidambaram's tenure of pushing the central bank to present a more optimistic view of economic growth. 

Also Read: Quality of India’s Economic Growth Should be Questioned, Says Former RBI Governor D Subbarao 

Duvvuri Subbarao was the 22nd governor of the RBI. In his latest book 'Just A Mercenary?: Notes from My Life and Career,' wrote that during Pranab Mukherjee and Chidambaram's tenure, the Finance Ministry exerted pressure on the central bank to lower interest rates and portray a more positive outlook on economic growth to boost confidence.

He also recalled an incident where Mayaram stated during a meeting that while governments and central banks worldwide were collaborating, the Reserve Bank of India was displaying resistance. 'whereas everywhere else in the world, governments and central banks are cooperating, here in India, the Reserve Bank is being very recalcitrant,' he said.

Mayaram wrote in The Print that that he didn't work with Pranab Mukherjee or Kaushik Basu. He explained that the discussions between the finance ministry and the RBI weren't about changing growth numbers but making small adjustments in policy rates due to economic difficulties.

He also stressed the need for central banks to cooperate with finance ministries during crises, mentioning examples like the global financial crisis of 2008 and India's economic challenges from 2011 to 2014.

"In 2011-12, the economy had tanked to 5.1 per cent, the fiscal deficit and Current Account Deficit were out of control, and India faced an imminent sovereign downgrade to junk status. Quick and effective policy interventions, both conventional and unconventional, were necessary. Shocking the economy back to a growth path required decisive action on the fiscal side and restoring the market’s confidence was crucial to give us some elbow room for policy action," he wrote in the article.