Review of C. Rangarajan’s Forks in the Road — My Days at RBI and Beyond: An unfinished agenda

To be a developed economy, India will require more than 20 years of strong growth and lots of economic wisdom and statesmanship, says former RBI governor C. Rangarajan

Published - December 16, 2022 09:02 am IST

A long-awaited account of the 1991 reforms is out finally. C. Rangarajan’s memoir, Forks in the Road: My Days at RBI and Beyond, discusses India’s transition from its post-Independence planning era to present times. This is an author with clear thinking, an intellectual bent to solving and analysing economic problems, understated style and professionalism.

The narrative is contextualised in contemporary debates: Why planning was the only available option post-Independence as an economic model for development, how when India finally broke away from planning in the 1990s, it was 20 years too late to reforms, and how the heady India growth story is unravelling. The author presents his views on the criticism of the decisions taken, why the alternatives were rejected and the unfinished agenda.

India’s economic landscape changes completely over the author’s career spanning 32 years. He was Governor of the Reserve Bank of India. He was the chairman of the drafting committee of the Eighth Five Year Plan (1992-97) that spelt out the transition from planned to a market-led economy. The Atal Bihari Vajpayee government picked him to chair the Twelfth Finance Commission. Before that, and while he was still the governor of Andhra Pradesh, it asked him to give a report for overhauling India’s official statistical apparatus. It remains hugely significant.

A brewing crisis

Rangarajan enters the narrative in 1982, when he joined the RBI as deputy governor. In 1990, the RBI writes to the government about the brewing Balance of Payments crisis. Under directions from Prime Minister Chandra Shekhar the author begins negotiations with the International Monetary Fund for funds to tide over the crisis, dashes off to the Bank for International Settlements to find out if India’s gold can be used. There’s talk of selling properties owned by the government abroad.

C. Rangarajan as RBI Governor in 1997.

C. Rangarajan as RBI Governor in 1997. | Photo Credit: The Hindu Photo Archives

Then, P.V. Narasimha Rao becomes Prime Minister. The author is now the RBI’s Governor. He and finance minister Manmohan Singh devalue the rupee, kickstarting the 1991 reforms (Rao is said to have developed cold feet): “The exchange rate regime that we had adopted in 1993 has stood the test of time”.

The reforms he helms are less talked about, even less understood. But they touch everyday life: the rupee’s value becoming market-determined (yes, there was a time when the exchange rate of the rupee was fixed by the RBI every morning).

People queue outside the Reserve Bank of India, New Delhi, to exchange ₹500 and ₹1,000 notes following the demonetisation announcement in 2016.

People queue outside the Reserve Bank of India, New Delhi, to exchange ₹500 and ₹1,000 notes following the demonetisation announcement in 2016. | Photo Credit: PTI

The prickly theme of RBI’s autonomy runs through the book. There was a time when the RBI’s rupee printing presses ran amok — to finance the government’s deficit. The moment the government’s cash balance fell below ₹50 crore, the RBI created treasury bills to restore it to that level. This printing of money becoming so automatic that the RBI’s Calcutta manager would operate it mechanically even before the RBI’s Governor would hear about it (the book quotes RBI Governor H.V.R. Iyengar’s 1957 letter to finance minister T.T. Krishnamachari).

Rangarajan and Singh put an end to this automatic financing of the government’s deficits, allowing the RBI to run monetary policy with some autonomy. His condemnation of Urjit Patel’s exit from the RBI, thus, becomes weighty: “The attempt to put pressure on the governor through the board was an unwise development.”

Indian currency going through a roller in its final phase of a print run.

Indian currency going through a roller in its final phase of a print run. | Photo Credit: Getty Images/iStockphoto

What the future holds

His take on the future is not reassuring. It will take a minimum of five years of sustained 9% GDP growth, he writes, to take India’s economy to the aspirational size of $5 trillion. Even then, the per capita income, $3,472, won’t be enough to shed the tag of lower middle income country. To be a developed economy, it will require more than 20 years of strong growth — and lots of economic wisdom and statesmanship.

The memoir is dedicated to Manmohan Singh, but the book is without political slant. If Singh fails to bring him as finance minister despite wanting to, the Narendra Modi government keeps his seminal poverty report in limbo, both not taking full advantage of his deep understanding of the economy.

Forks in the Road: My Days at RBI and Beyond; C. Rangarajan, Penguin Business, ₹699.

The reviewer is a writer and journalist.

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