History of Reserve bank of India
MONETARY policy is also about reducing hunger and malnutrition, putting children in school, creating jobs, building roads and bridges and increasing the productivity of our farms and firms
Established in 1935, the Reserve Bank of India is one of the oldest central banks in the developing world. Prime Minister Dr.Manmohan Singh released the fourth volume of the Reserve Bank of India's history at a function held on Saturday in New Delhi. The volume documents the institutional history of the Reserve Bank based on official records, publications and discussions with persons closely associated with the functioning of the Reserve Bank during the period. Published in two parts, Part A and Part B, Volume 4 covers transformation of the Indian economy from restrictions to progressive liberalisation and captures the implementation of structural and financial sector reforms. It thus envelopes the tenures of six Governors - part of Dr.I.G. Patel's tenure to begin with, and covering Dr.Manmohan Singh, Mr. A. Ghosh, Mr.R.N.Malhotra, Mr. S. Venkitaramanan and ending with the tenure of Dr. C. Rangarajan. Interestingly, it includes both, the period between 1982 and 1985 when the Prime Minister himself was the Governor of the Reserve Bank as well as 1991 to 1996 when he was India's Finance Minister.
Does History repeat itself ? In his Welcome Address, the RBI Governor, Dr.SubbaRao said, “In their painstakingly researched book, This Time is Different: Eight Centuries of Financial Folly, Kenneth Rogoff and Carmen Reinhart argue that every time a crisis has occurred, experts have been asked why they did not see it coming. Every time, experts have replied that past experience was no guide because the latest crisis is a result of new circumstances. In other words, their standard excuse has been, ‘this time is different'. Yet this ‘this time is different' argument does not hold. Reinhart and Rogoff put forward impressive evidence showing that over eight hundred years, all financial crises can be traced to the same fundamental causes as if we learnt nothing from one crisis to another. The surmise therefore is that, at least in matters of economics and finance, history repeats itself, not because it is an inherent trait of history, but because we don't learn from history and let the repeat occur.”
Does History repeat in RBI ? RBI history documents that about 35 years ago, the Reserve Bank got into a controversy over its auction of gold. Again, in 1991, there was a heated, if also emotional, debate in the country when the Reserve Bank pledged its gold reserves to tide over the balance of payments stress. It will be interesting to conjecture on how history will judge the purchase of 200 MT of gold by the Reserve Bank from the IMF in 2010, and its more recent policies to restrain imports of gold?
Keep Your Ear to the Ground - one wise Economist to another : When he was appointed Governor of the Reserve Bank in 2008, Dr.SubbaRao went to call on the Prime Minister before he took charge. A man of few words, the Prime Minister told Rao one thing that stuck in his mind: “Subbarao, you are moving from long experience in the IAS into the Reserve Bank. In the Reserve Bank, one runs the risk of losing touch with the real world. With your mind space fully taken up by issues like interest rates, liquidity traps and monetary policy transmission, it is easy to forget that monetary policy is also about reducing hunger and malnutrition, putting children in school, creating jobs, building roads and bridges and increasing the productivity of our farms and firms . Keep your ear to the ground.”
The Prime Minister certainly knows his economics, though we are not really certain about his politics.