A crisis is an opportunity. Manmohan Singh and P Chidambaram have a unique opportunity to reform the RBI
...............Unfortunately, Chidambaram has constituted no such committee to suggest names of candidates to succeed Subbarao. At the very least, the Finance Ministry should have advertised the position, in India and abroad. While it would be expecting too much for any Indian Government to consider foreign nationals for the RBI job (the UK recently appointed a Canadian as Governor of the Bank of England), it makes complete sense to solicit the candidature of Indian nationals from the worlds of academia or private sector (banking, investment banking) or international organizations (World Bank, IMF). That would only bring diversity and richness to a shortlist which would otherwise consist solely of economists serving in the Government system......................
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It is not only the question of RBI GUV being from outside the political ambit which troubles the politicians, but the vested interest of bureaucracy as well.Remember when Montek Singh was appointed Finance Secretary, there were loud protests from the IAS as they considered this post to be their prerogative. Dr Manmohan Singh as Finance Minister cooly Montek Singh gave the reply "Find me a person from IAS who is as intelligent as Montek Singh, I will appoint him". The IAS had no reply.The media wrote that Dr Manmohan Singh backed Montek Singh to the hilt which was published on the first page of the news papers.The sole claim of IAS to be RBI GUV is that IAS man will be able to coordinate with various ministries on economic matters and system will run smoothly.Initially, Dr Subbarao was subservient to MoF and kept fiscal policy aspects predominantly in mind, but after one and a half year, he became a confirmed monetarist. As Fin Secretary, his view was that public debt matters should be in Government domain, he did not find anything wrong with subsidies,5% Fiscal Deficit, 4-5% Current Account Deficit,micro management of banks (Shri Mittal was Secretary Financial Services with Subbarao as Finance Secretary), conservative FDI/FII policy etc; but became more open and assertive as RBI GUV i.e. what was right as Fin Secretary appeared to be wrong as RBI GUV.The central idea is anybody who comes from IAS struggles a lot to be independent, much energy is wasted squabbles with MoF, he faces resistance and in the process becomes reactive. As IAS, he is supposed to be subservient to the political masters but as RBI GUV one is supposed to have spine. Therefore a perfect due diligence is required for selection of GUV.
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