
Former Reserve Bank of India (RBI) Governor Duvvuri Subbarao has highlighted in his latest book, ‘Just A Mercenary?: Notes from My Life and Career’, that during the tenures of Pranab Mukherjee and P Chidambaram as finance ministers, the finance ministry exerted pressure on the RBI to lower interest rates and present a more positive picture of economic growth.

Duvvuri Subbarao is an Indian economist, Central Banker, and retired IAS officer. He was the 22nd Governor of Reserve Bank of India, served under Prime Minister Dr. Manmohan Singh. After stepping down from RBI, he was a Distinguished Visiting Fellow first at the National University of Singapore and later at the University of Pennsylvania.
Lack of Understanding and Sensitivity towards Central Bank Autonomy
Subbarao expressed his concern about the lack of comprehension and appreciation within the government for the importance of maintaining the autonomy of the central bank. He stated that there is little understanding and sensitivity within the government on the importance of central bank autonomy.
Tensions between RBI and Finance Ministry
Subbarao recalled incidents where government officials, including Finance Secretary Arvind Mayaram and Chief Economic Adviser Kaushik Basu, contested the RBI’s estimates and suggested projecting a rosier economic outlook. He mentioned a particular occasion during Pranab Mukherjee’s time as finance minister when government officials opposed the RBI’s estimates and assumptions.
Importance of Maintaining Professional Judgment
Subbarao emphasized the importance of the RBI maintaining its professional judgment and not altering projections to manipulate public sentiment. He expressed discomfort with the idea that the RBI should act as a cheerleader for the government’s policies.

Different Approaches of Chidambaram and Mukherjee
In his book, Subbarao detailed his interactions with both P Chidambaram and Pranab Mukherjee, noting their different approaches but shared desire for softer monetary policies. He mentioned that Chidambaram typically argued his case like a lawyer, while Mukherjee was more of a quintessential politician. Subbarao also highlighted instances where Chidambaram publicly expressed disagreement with the RBI’s stance on interest rates.
Subbarao mentioned that Chidambaram, after resuming his role as finance minister in October 2012, put enormous pressure on the RBI to lower interest rates. However, Subbarao refused to oblige him due to objective considerations.
Uncomfortable Relationship and Public Disagreement
Subbarao described the relationship between the RBI and the finance ministry during his tenure as uncomfortable. He recalled an incident where Chidambaram publicly expressed his disagreement with the RBI’s position on interest rates in a media interaction outside the North Block. Chidambaram stated that if the government had to walk alone to face the challenge of growth, they would do so.
Subbarao’s Career Journey and Insights
Subbarao’s book also reflects on his career journey, from his early days as a sub-collector to his tenure as RBI governor. He offers insights into the challenges faced by emerging economies in a global context. Subbarao currently serves as a senior fellow at the Yale Jackson School, drawing on his extensive experience in economic governance.
In the RBI Act 1934 it is clearly mentioned that RBI is sn autonomous body of the country as it controls all the Banks public and private sector.But since 2014 and onward the Central Govt. has too much interference in the working of RBI, thus, demonetisation in 2016 was also a ring of this chain.
The RBI Governors are only remained as rubber stamp for the Nation. Only bureaucrats like Yesman are appointed and extension in tenure of outspoken Governor can not be sanctioned.