Alan Greenspan (Former Chairman of USA’s Federal Reserve) once remarked that, “heading the Fed requires much more than mere competence and understanding. It requires a nose, intuition, vision and a belief in monetary management to keep the economy in the right direction.” He was obviously not talking about central bank governors in South Asia. Over here, our governors have been typically considered to be subservient to the Finance Minister or the government of the day, displaying little independence or assertiveness to guard the autonomy of the institution they represent. However, this may be gradually changing. As globalisation firmly takes root, the central bank is too important an institution to be taken lightly, given the complexity of managing national economies on an increasingly international canvas. Independence and autonomy of a central bank in any country’s economic governance is of paramount importance as it plays a pivotal role in safeguarding national currency, taming inflation and keeping sanity in allocation of national financial resources; often proving to be the bulwark preventing the government turning into a predator on to its own people. Compromise this role and you see: A government encroaching on the private sector’s domain; capital moving from efficient entrepreneurial private sector hands to the often inefficient cum non-transparent hands of public sector managers; and most dangerously, accumulation of unsustainable or unserviceable debt by the government. And it is in this context that Dr Y V Reddy can be termed as one of the architects of economically modern and transformed India of today. A man of many facets – activist, bureaucrat with a diversified experience, economist and a realist – he went on to be the Governor of the Reserve Bank of India (RBI), to lead a five-year period of Indian stability and sustainable progress.

His latest book, ‘Advice & Dissent’ – My Life in Public Service, is now out and is an essential read for anyone who wants to exactly know what brought about the reversal of Indian economic policies back in 1991 and what were the policy and leadership challenges involved in gradually getting India to change its economic course in order to become one of the most vibrant economies of the world today. The confidence in him was such that he was granted the maximum legally permissible tenure of five years, instead of the norm of initially allowing three years only. This by no means implies that Dr Reddy’s task was easy.

Old habits die hard and ancient habits die even harder, so naturally he had to fight his way through a long history of bias to carve out his own niche style of policymaking that entailed arriving at decisions through debate and consultation instead of arbitrary use of authority, while maintaining a subtle and deft relationship with the finance ministry – this to ensure that a confrontation does not brew between the two most economic organs of the State. Most importantly, Dr Reddy possess a brilliant sense of humour – a quality rather rare in the corridors of finance and economics and yet an element so crucial (especially in the Subcontinent) in creating an environment of camaraderie and teamwork; essentially, getting the work done without making unnecessary adversaries. A journalist once asked him: Governor, how independent is the RBI? To which he replied, “I am very independent. The RBI has full autonomy. I have the permission of my finance minister to tell you that.” Among academics and participants in the financial sector, a major area of current debate is the relationship between the government and the central banks. Embarking on revolutionary or independent monetary policymaking in our part of the world can both be testing and dangerous and without the art of being able to slide things through without getting involved in counterproductive controversies, one can find it difficult to survive. Dr Reddy had both the wisdom and the art to get the required work done. He himself concedes: “In policy making, arriving at an appropriate solution is both a science and an art.”

Dr Reddy and his spouse Geetha can be described as self-made in every sense of the word. Their rise from the diversified ranks of Indian bureaucracy’s hierarchy depicts a story of sheer hard work and commitment to every job and role assigned to them. From the vast and spacious bungalows reserved for Indian Collectors (a legacy from the British rule) to the one-bedroom flat in Delhi, from the naked authority yielded by a collector to the intrigues of the Capital’s power corridors, together they took everything in its stride. He cites how, when assigned to one of the most prestigious assignments on the World Bank desk (Delhi) and due to his closeness to Dr Manmohan Singh, he met with some unexpected wariness from his colleagues. Well, instead of taking it to heart he chose to be prudent by lying low – ‘a hundred-day low-profile strategy’. On a lighter note, he paid heed to an adage from his old professor’s desk: “Even a fish could avoid trouble if it kept its mouth shut.”

Every successful central banker has his/her own legacy. Dr Reddy’s perhaps lay in correcting the external account balance of India and returning transparency to the Indian financial system. Mindful of the debacle of 1991, he ensured that throughout his 5-year tenure, 2003-08, the external sector balance remains his primary focus and going by his first action on joining as governor (RBI) to ban investments through overseas corporate bodies (OCBs) of NRIs (Non Resident Indians) – since their beneficial ownership was unclear – he made it clear that nothing that undermines the integrity of the financial system will be tolerated.

Finally, where did Dr Reddy miss out? Critics say that he should have fought more for the independence and the autonomy of the RBI. Not entirely true because one can argue that he was a man with a job to do, which he did well on his own terms. In his own words he defines his approach to central banking where, “selecting what appears to be best in various doctrines, methods or styles.” After all, he presided over one of the best results under the RBI – high growth, low inflation, stable Indian rupee and a robust banking system – surely every central bank governor’s dream! The Reserve Bank of India is a place that is sometimes hard to justify in democratic or institutional terms. Except for a few cranks and obsessives, almost nobody can even explain how it works, let alone develop an informed opinion about the policies that emerge from it. Dr Reddy fought for a culture of professionalism at the RBI and perhaps it his efforts that are bearing fruit in seeing the likes of Raghuram Rajan and Mr Urjit Patel as his successors!