Why not Reddy for RBI governer?

Question

He is the wise man who got cursed by even senior economists till almost 6 months ago for not reducing rates and still waited to do the opposite when inflation bombed. He is the wise man who is lauded by the international investment fraternity for being one of the most preemptive central bankers in the world to recognize the risks of recession early and who raised interest rates way before the slowdown. Most of all he is the undaunted bureaucrat who challenged the politicians to question why there were no curbs on equity investments making our currency and balance of trade vulnerable in the first year of his governership. He did this by saying on CNBC that equity investments should be taxed as obviously most of it was on account of foreigners. He has never relented to pressures from foolish policians and that is the hallmark of a real leader. No wonder the present government is desperately waiting for his term to end. His term as governer will definitely not be extended.

Answer 1

Dr, Reddy is a very learned and wise man. He has generally taken correct monetary policy steps. However, the options available for and the effectiveness of monetary policy are constrained by govt. policy on fiscal deficit, foreign exchange inflos and other international factors. There was not much of a problem for monetary policy so long as GDP growth rates were high and international oil prices were stable. The impact of sharp and quick increase in international oil prices contributes to inflation that RBI cannot really curb except by reducing money supply that would hurt economic growth. The Govt. now sees the point and supports RBI's tight money policy.

However, with all his successes Dr. Reddy shoukld now be given higher level economic policy making role than that of Governor RBI: he has been there in RBI for quite a very long period. We must allow other younger competent persons to develop as successful RBI governor.

BEing a person whose life as an administrative officer spent largely during control regime, he still is not comfortable dealing with free markets as is the political leaders. Future Governors must learn to deal with free market mechanisms with more matured and physical control free monetarty policy.