RBI and Beyond: Review of Dr C. Rangarajan’s Memoir "Forks in the Road."
By Viral Acharya
It is only after one reaches the summit that one can reflect properly upon how far one has travelled. Dr C. Rangarajan’s book, an account of his public service in India spanning over three decades (1982-2014), details his monumental journey as a key architect of the modern Indian financial system. It is my honour and privilege to have had a chance to read and review the book.
Dr Rangarajan, a macroeconomist by training and a former professor at New York University, held positions as deputy governor and governor of the Reserve Bank of India (RBI), the governor of two states, the chairman of the 12th Finance Commission, a member of the Rajya Sabha, and the chairman of the Economic Advisory Council. I can’t think of any individual in India who has been successful both in technocratic and semi-political appointments, moved seamlessly between the two, and always delivered on the job at hand with high impact. It is, therefore, in itself a matter of great post-retirement service that Dr Rangarajan has written this memoir covering the economic backdrop, policy challenges, decisions made, stability secured, and growth unleashed during his term in various positions.
The 1990s’ reforms following the balance-of-payment (BOP) crisis represent the first salvo in the book. A switch from the primitive setting in which Dr Rangarajan as the RBI governor set the exchange rate of the Rupee against the US dollar in a back office (of course, in discussions with the staff) to an exchange rate being set mostly by market forces amid a trading volume of billions of dollars today, is a giant step in managing India’s external sector. That step required ceding control, which, Dr Rangarajan, along with the government of India, undertook to avoid a repeat of the BOP crisis. He also then laid the prudent framework for managing capital flows, relying more on long-term equity-style flows and less on fickle, hot-money debt flows, and never on dollar-denominated government bonds.
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Viral Acharya is the C.V. Starr Professor of Economics