YV Reddy’s autobiography Advice and Dissent: My Life in Public Service shares its title, but not its action sequences, with a recent political thriller. In India, dissent is rarely pushed to breaking point. This lucidly written and gripping page-turner is in two distinct parts. The first 40% covers the early days of Reddy’s career until his resignation from the IAS in 1996. The remaining pages cover his progress in the RBI and as chairman of the 14th Finance Commission. The book begins as a straight autobiography, but ends up as a memoir of economic history.
Autobiographies by IAS officers allegedly have three characteristics: praise for their bosses, lamentations over their ‘punishment’ postings, and studied indifference towards colleagues and subordinates. Though Reddy’s memoir exhibits these features, it’s more than redeemed by his reflections on political economy and pen portraits of NT Rama Rao and others.
A few strands from his IAS career are carried forward to his stint at the RBI. He pursued a parallel academic and semi-academic career, very unusual for an IAS officer. From his college days, Reddy was a camp follower of communism, becoming disillusioned in 1982 when, in Leningrad, he saw long queues of people hoping to buy a broom. Nevertheless, his public policy stance was towards state action and he remained a market-sceptic. In the post-liberalisation era, he published interesting works on the privatisation of public enterprises. An early attempt at academic research into black money was thwarted by his guide, who cited ‘want of reliable data’. Most importantly, his stints in the district taught him the art of withdrawal and compromise, which made him a brilliant negotiator. He was cautious about court prosecutions, arguing that court cases were too heavy a burden for a weak administration.
Reddy presents a fascinating narrative of his last five years in the government, covering the foreign exchange crisis of 1991 and the liberalisation by PV Narasimha Rao. However, he does not seem to sense the concomitant rise in economic crime, hawala dealings and export earnings falsifications. He was an early supporter of gold import liberalisation. At the Reserve Bank and later, Reddy seems to have developed a ‘non-IAS’ type of personality. He recalls and praises his colleagues and subordinates. The praise of the bosses continues, but is now more balanced. The narrative now includes large chunks of economic theory intended to explain the background of historical events.
In essence, the RBI must always counter the finance minister’s large fiscal deficit with a tight monetary policy, so that the nation does not face inflation. The tension between the finance minister and the RBI is eternal and systemic. No government has yet won an election on promises or achievement of economic growth and sound money. The political belief is that only economic populism can win elections. During Reddy’s tenure, the RBI had its dose of populism (writing off agriculture loans), but not an overdose. The reform initiatives (better digitalised clearance facilities and ATMs) were permanent, but perhaps not far-reaching enough (no privatisation of public banks, few newer banks, and slow reform of financial markets). There was no reform of rural cooperative banks, though urban cooperative banks received attention.
His crowning achievement was, of course, keeping India out of the global financial storm of 2008. His correct reading of the global economic situation was aided by his innate market scepticism and he was able to take early steps against the overheating of the economy even in the face of political opposition. The nation must remain ever grateful to him for this. However, his cautious approach to markets was destined to come against the eternal market optimism of P Chidambaram. After several cat-and-mouse encounters, the then FM and the political class lost faith in him and denied him further extensions. Perhaps Reddy never understood how deeply intertwined international economic crimes had become with the political establishment.
Though Reddy went on to handle the 14th Finance Commission with distinction, he does not end his memoir with a prognostication for the future, or reflect on hawala, fake currency and money laundering, the hot topics of today. To the reader’s delight, the narrative is interspersed with often deeply ironic vignettes and humorous tales of encounters with the high and mighty. My favourite moment was when he presented Manmohan Singh with a copy of Kindleberger’s opus on economic manias. The lesson was apparently lost on the then PM, who brushed it aside as being old-fashioned. Subsequently, the long UPA-era inflation and asset price bubble decimated the Congress in 2014 and besmirched Singh’s reputation. The moral is clear: you ignore the wise Reddy’s medicine at your own risk. So go out and buy this modern classic without fail and remember that quantitative easing has not ended and overheated markets will always ultimately crash.
(Written by Brijeshwar Singh)