Business Today

Second wind

Rajiv Bhuva | Print Edition: September 4, 2011

Unlike the huge 50 basis point hike in key policy rates he announced in July, the two-year extension granted to Reserve Bank of India Governor Duvvuri Subbarao was not entirely unexpected.

The soft-spoken Subbarao, 62, had displayed a hard-nosed approach in dealing with the global financial crisis that unfolded soon after he moved into the corner office at the RBI headquarters in Mumbai on September 5, 2008.

Today, when the global economy faces its worst challenge since 2008, few could have ignored his record in effectively managing liquidity during the height of the financial crisis, least of all Prime Minister Manmohan Singh.

"I am happy that the government has reposed its confidence in me at this difficult juncture in the world economy," was the brief response from the finance ministry veteran.

SPECIAL:RBI Governor defends central bank's monetary policy

Subbarao has taken RBI through exciting times and 180-degree turns in policy management in the past three years. In order to cut off-cycle rate revisions, monetary policy reviews began to be conducted eight times a year from the quarterly cycle earlier.

When the government first mooted the idea of a super regulator in the aftermath of the financial crisis for better coordination amongst regulators, Subbarao strongly fought for RBI's independence.

He also recently took the government head-on over the issue of managing inflation, saying monetary policy works efficiently only when the fiscal situation is under control.

However, one thing that stayed ahead of this marathon runner for most part of his tenure as RBI chief was high inflation.

It has persisted in high single digits despite eleven rate hikes over the past 15 months, fuelling criticism that Subbarao was always "behind the curve". He may now finally win the race against inflation given the global fall in commodity and crude prices.

The rise in both in the recent past had largely queered the pitch for him.

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