261 / June 4, 2024

IAS Turned RBI Governor: Duvvuri Subbarao On CM Chandrababu Naidu, IAS Eligibility Criteria & More

53 minutes

261 / June 4, 2024

IAS Turned RBI Governor: Duvvuri Subbarao On CM Chandrababu Naidu, IAS Eligibility Criteria & More

53 minutes
Listen on

About the Episode

Key Decisions and Reflections as RBI Governor

Understanding India’s administration is no easy feat. From the challenges faced by IAS officers to the responsibilities of the RBI Governor, the journey is filled with excitement and challenges.

In this insightful episode, Dr. Duvvuri Subbarao, ex-Governor of the Reserve Bank of India and author of “Just A Mercenary?” shares his extensive experiences in both state and central government roles.

We cover the contrasting roles of a finance secretary and an RBI governor, and understand the delicate balance between populist measures and financial stability. Dr. Subbarao offers a candid look at the challenges of IAS recruitment, the judicial process, and the legacy of British administrative systems in India.

Dr. Subbarao’s reflections on his tenure as RBI Governor provide valuable insights into key decisions and the economic landscape during his time.

Join us on the episode as we learn all of this from one of best minds in India.

Watch all other episodes on The Neon Podcast – Neon

Or view it on our YouTube Channel at The Neon Show – YouTube


Siddhartha Ahluwalia 01:22

Hi, this is Siddhartha Ahluwalia, welcome to the Neon Show. Today, I’m so excited to have Dr. Duvvuri Subbarao, ex-RBI Governor. Sir, so excited to have you on the podcast. You have authored this book, Just A Mercenary?. I loved reading it. It covers your entire life.

Your experiences. And various experiences, both in center and state government. And it gives us insight into the life of an IAS officer.

I had never seen the life of an IAS. I think through this book, I lived the life of an IAS officer.

Dr. Duvvuri Subbarao 01:56

Thank you. Thank you for saying that, Siddhartha. It means a lot to me.

Siddhartha Ahluwalia 02:00

It’s shown very cushiony look at the life of an IAS officer, but it’s a tumultuous book, right?

You had a very tumultuous journey. There was, I would say, you touched scale, but there was no peace, I could say, because there was so much movement. But mostly, you know, the perception of the IAS officers that we had had recently in the country, that they work 10 to 5, 10 to 6.

But you have at times worked 18 hours a day.

Dr. Duvvuri Subbarao 02:28

Well, I can’t say that I worked 18 hours a day and others worked less. And I think most IAS officers are hardworking. And you must measure an IAS officer by the results they deliver, rather than the number of hours they put in.

Siddhartha Ahluwalia 02:43

Agree. I think you also commented to Chandrababu Naidu Sir once. He commented that I’m working 18 hours a day and the other state CM is working for 6 hours a day, 4 hours a day.

Dr. Duvvuri Subbarao 02:57

How come they’re doing better than us in commercial tax collection? And I wanted to tell him, which I did not, was that the buoyancy in commercial taxes is not correlated with how hard the chief minister works.

Siddhartha Ahluwalia 03:12

Agree with you, Sir. So, before we dive into some parts of your book, would like to understand for our audience, what is the term and where do these terms originate like bureaucrat, collector and district magistrate? Because these are used in various parts of the books.

Dr. Duvvuri Subbarao 03:28

Yeah, bureaucracy, I can’t really describe or indicate where the word came from. Bureaucracy, as we understand, is the delivery arm of a government. And it’s used, sometimes it’s used pejoratively, like the communist country’s bureaucracy, etc.

But bureaucracy is, as much as it is a delivery arm, it is also used in an uncomplimentary way, like bureaucratic hurdles, bureaucratic resistance, etc. Collector, of course, came from the colonial era, because the district-level officer, the head of the district, his major responsibilities were just to collect taxes and maintain law and order. So, because the primary responsibility was collecting taxes, the head of the district came to be called collector and that has continued, even after collecting taxes has become one of the least significant items on the job chart of the so-called collector.

District magistrate, of course, comes from the law and order dimension of a district officer. In fact, in North Indian states, the head of the district is usually called a district magistrate, whereas in the South, we call the head of the district as the collector. But they perform roughly similar functions.

In the South, collectors are also DMs, in the North, DMs are also collectors.

Siddhartha Ahluwalia 04:56

And Sir, if you can elaborate, what’s the role of a finance secretary and what’s the role of the RBI governor?

Dr. Duvvuri Subbarao 05:07

Yeah, yeah, quite a broad question, but I’m happy to explain.

The finance secretary is the secretarial head of the finance department of a government. The bread and butter job of the finance department in the state and the finance ministry at the center is to formulate and implement the budget, monitor expenditure, ensure that quality of expenditure is high and ensure that budget integrity is high. But there are lots of things.

I’ve simplified in one sentence the broad mandate of budget making because you get revenues throughout the year, you have expenditure commitments throughout the year, sometimes revenues do not come in a regular stream throughout the year, they come in bulks and spurts. Similarly, there are spikes in expenditure. So, how do you manage your books?

Just in a household, you have to manage the budget. Governments also have to manage the budget. So, budget management, expenditure control, expenditure management throughout the year, revenue collection throughout the year, those are the bread and butter jobs of the finance department.

But the finance department is also expected to do a financial scrutiny of all policy proposals and programs of the government. If, for example, the health department in the state government says that we need to buy x-ray machines for all 30-bed hospitals, instead of one machine, we must have two and they have to give a justification and the finance ministry is supposed to evaluate the justification and see by equipping each 30-bed hospital with two x-ray machines is the most appropriate avenue for spending additional money.

Siddhartha Ahluwalia 07:06

And what’s the role of a RBI governor?

Dr. Duvvuri Subbarao 07:09

Well, the core mandate of the central bank is to maintain price stability and financial stability and as head of the RBI, the role of the governor is to maintain price stability and financial stability, but that comes with some associated functions. Price stability is associated with monetary policy, financial stability is associated with regulation and supervision of financial institutions and financial markets.

There is, in addition, exchange rate management for external sector viability. The Reserve Bank of India also regulates and manages payment systems, all the UPIs that you see. Then the Reserve Bank of India, like central banks in other emerging and developing countries, also has some development responsibilities like financial inclusion or priority sector lending or lead banks in every district.

So, the Reserve Bank has policy responsibilities, regulatory responsibilities and development responsibilities.

Siddhartha Ahluwalia 08:19

As you mentioned the role of a finance secretary, in your book you have mentioned the case where a minister, the health minister came to Chandra Babu Naidu when you were the finance secretary, health secretary came to and asked for a 50 crore budget and you were already in deficit and Mr. Chandra Babu Naidu asked you 50 crores more and you became more negative.

Yeah, would love to know that incident and what roles is that then the finance secretary plays because if the CM and the finance minister is making all the decisions.

Dr. Duvvuri Subbarao 08:52

Well, as I told you, one of the responsibilities of the finance department is budget management. So, we make the budget at the beginning of the financial year. There is sufficient flexibility built into the budget for departments to shift expenditure from one head of account to another.

Sometimes there is urgent expenditure need, for example, if it erupts. Health department has to spend more and we did not at the time of making the budget anticipate this. So, how do you make budget provision?

Do you take money out of other departments? Are there expenditures? Excuse me, health department etc.

Those are all matters of detail but matters of budget management. So, in this particular instance, I went to the Chief MInister to explain to him the financial situation. Typically, for governments at the state level and at the central level, expenditure needs far outweigh the available revenues.

So, the question is how do you allocate available resources to the best use? We do that in the budget but in the course of the year, some additional expenditure commitments come in. So, at that time, I went to the Chief Minister to explain that our revenue collections are okay but our expenditure needs have gone up much more than we anticipated at the time of the budget.

It is difficult for us to manage both ends. So, we must cut expenditure. Where do we cut?

Because where do we cut expenditure is also a political decision apart from a bureaucratic decision. So, I went to seek his instructions on where to cut and advise him on where to cut and we agreed after some persuasion. He agreed to certain cuts and I thought I had won the battle and as I was stepping out of the room, the health secretary walked in and he knew what she was coming in for.

She must have been asking him for additional money for some health education expenditure and then as soon as he saw her, he said Subbarao, he told me in Telugu but what he said was, can you please give 50 crore to the health department. Here, I’d spent half an hour with him trying to persuade him to cut expenditure and then within minutes of that agreement, he was asking me to provide additional money for a good purpose of course but then it was his compulsion and my responsibility.

Siddhartha Ahluwalia 11:25

It must be so difficult, I believe because you are the one or a finance secretary is a one who has tight hold of a ship but a chief minister and you have described in several cases when NTR sir or Chandrababu Naidu both were chief ministers, sometimes they have to resort to what’s the most popular demand from the public and it just harms the long-term impact of the budget.

Dr. Duvvuri Subbarao 11:58

See, that’s par for the course. Politicians have political compulsions and they have to manage their platform in accordance with their political compulsions because that is how they get elected. But oftentimes the political compulsions come into conflict with budget integrity and financial fiscal stability of the government.

Because if political leadership wants to spend money on populist schemes which get them votes. But if those schemes do not yield any return, the question for the government as a whole is how do you repay that loan?

Now, at a household level, if you take a loan for example to educate your daughter, you’re investing in her and that will yield return to her and to you and to the society and that loan will repay itself. If as a corporate you borrow money, that loan should repay itself because the corporate is expected to take that loan, invest it and generate an income stream that will repay the loan.

The same principle applies also to the government. Government must when it borrows, it must be sure that it is able to repay by using that money in a way that generates an income stream. On the other hand, if you borrow money and spend it on a populist scheme, then that is used for what economists call current consumption that does not yield a return.

So, how do you repay that loan? That is the question. I grant that in a poor society like ours where millions struggle for livelihood every day, it is incumbent, indeed mandatory for governments to provide safety nets but that’s got to be restricted because it is being borrowed as I said out of, I’m sorry, it’s being financed out of borrowing.

So, it’s got to be limited. There’s got to be a balance between political compulsions of the political leadership and maintaining the integrity of the fiscal system.

Siddhartha Ahluwalia 14:08

Can I assume the life of a chief minister and his cabinet is also difficult because…

Dr. Duvvuri Subbarao 14:14

Well, it is certainly difficult but lots of people want to be chief ministers and cabinet ministers. There is joy in serving society, having power, taking important decisions that matter to the public.

Siddhartha Ahluwalia 14:27

On one occasion, NTR sir when he was the chief minister and you were the finance secretary, he had irrigation schemes and specifically they had allocated large budget for his own district and he went to a prime minister then PV Narsimha Rao to ask for budget for his home state and he got rejected.

Dr. Duvvuri Subbarao 14:51

Yeah. It wasn’t for irrigation schemes, it was that NTR campaigned in the election on a platform of imposing total prohibition, reducing the price of subsidized rice and other schemes which meant that additional expenditure commitments and sacrifice of revenue. So, both sides we were losing. We were losing revenue and taking on additional expenditure responsibilities.

So, it was difficult to make both ends meet. So, he was campaigning on that and he was not in office at that time when he was campaigning. He was campaigning to come back as chief minister.

Somebody in the media asked him during the campaign trail, how will you finance this and NTR said that where there’s a will there’s a way and he laughed in a cinematic way and everybody clapped and applauded him. That reporter did not press the question. Within 10 days after that elections took place, NTR came back as chief minister and he had to face the problem of how do you make the ends meet.

Now, you have additional commitment, you have lower revenue. Then we told him what do we do. He said I will go and ask the prime minister for more money, not realizing that prime ministers have limited flexibility if at all about giving ad hoc money to states.

So, that was the context I was writing about. He went to Mr. P V Narsimha Rao. I don’t know what happened in that meeting but NTR came back to Hyderabad, quite a disappointed man.

Siddhartha Ahluwalia 16:23

These are so many interesting stories, I can go on and on. But the role of the IAS as you mentioned in the book has also changed. I feel that what you said in the IAS had only two chances in 1970s and now they have six chances and usually the age of the IAS officers when they begin their tenure was between 21 to 24.

Now, it goes up to 32 and also you mentioned that earlier first attempt was when 80 percent of the IAS officers got selected and the second attempt the remaining 20 percent got selected. Today all the IAS officers are getting mostly like majority of the IAS officers are getting selected.

After four to six attempts. Do you think we have unnecessarily bogged down the IAS machinery? Was it better earlier the way the mechanism it worked?

Dr. Duvvuri Subbarao 17:10

Yeah, from my limited understanding of the current situation, current recruitment pattern, I believe that there is a need for rethinking on the recruitment examination, the structure of the exam certainly but also in the number of chances given to a candidate to appear and the age span. You know 20 to 32 is too long a span and six attempts is too many. What happens when you give so many attempts is that the people who typically qualify, I’m making a ballpark judgment, which is that those people who qualify are more likely people who mastered the technique of the examination rather than people who have the inherent competence capability.

So I think you must give more than one chance certainly because there’s an element of luck but two chances at the most three chances but giving three six opportunities under long span of 20 to 32 years is pushing youngsters into this sunk cost fallacy that they keep attempting then they don’t succeed but having invested so much time and effort they must they think that they must continue to try and most people will not make it even after six attempts because there’s so many people are preparing and so few who get in.

So their entire time when they should be looking at other opportunities is lost. So there is a strong case for reconsidering the eligibility eligibility criteria and the number of chances offered.

Siddhartha Ahluwalia 19:00

And you also mentioned about Indian judiciary the process is the punishment.

Dr. Duvvuri Subbarao 19:04

That’s right. Why I only mention all of you are saying that right?

Siddhartha Ahluwalia 19:08

Yeah. We would love to know your thought process behind it. Why do you say that and your historical points that you have regarding it?

Dr. Duvvuri Subbarao 19:17

Yeah because litigations and judicial inquiries take a long time in our system. In part because I believe the judiciary is overloaded partly because there is too much of adjournments etc. There is no time limit or if there are time limits set but time limits go on occasionally we see that you know a 70 year old case has just been decided. Sometimes people have died after they’ve started litigation. So and a lot of infructuous litigation as well.

But I’m when I say process is the punishment I’m talking more about criminal prosecution. Especially of civil servants and politicians who are who come into legal crosshairs because of some decisions taken by them. And they have to fight them much after they’ve left the scene and that takes a long time. Meanwhile they go through the process of being punished in the very process of this inquiry. And you personally had to go through.

Dr. Duvvuri Subbarao 20:30

Well I did not fortunately have any criminal investigation against me but I did have to. I was involved in some cases where I had to give evidence in particular the 2G case that I talked about.

Siddhartha Ahluwalia 20:46

Yes and there’s a story of Tehsildar and his dog. Would love to know it.

Dr. Duvvuri Subbarao 20:53

The Tehsildar and the dog I was I related the story in the context of temptations that are available to civil servants and how they must see through them and the story or the fable of the Tehsildar and his dog is that there was in one small town a Tehsildar who did not have a family. All he had was a dog. He was very fond of the dog and the Tehsildar is a powerful official.

So lots of people would come to him to present their cases or seek his decision or seek his permission or whatever and to curry his favor they would pet the dog. They’d bring stuff for the dog, bring gifts for the dog to carry the favor of the Tehsildar. And so at some point of time the dog died. The entire town population turned up for the cremation of the dog because they wanted to curry the favor of the Tehsildar.

A couple of years later the Tehsildar himself died and nobody came because the chapter is over. So that’s what civil servants must understand that do not fall into this trap of people of people currying your favor. Just be aware of that.

Siddhartha Ahluwalia 22:16

Because I think many civil servants believe the seat on which they are sitting is their identity. Yes. But it’s not.

The people who are coming to you for favors, they are worshiping the seat, not you. You and the seat are two separate. Once you leave the seat.

Dr. Duvvuri Subbarao 22:35

That is true. Yeah. I don’t have anything against their identifying with their seat. If the collector identifies as the collector that’s self-reminded about the responsibility she has.

But if you believe that people are being subservient to you because you’re powerful. And you fall into that trap of favoring them just because they’re trying to carry your favor, then I think it hurts public interest.

Siddhartha Ahluwalia 23:09

You also mentioned in your book that Britishers were better administrators and the engine that they adminstration was better.

Dr. Duvvuri Subbarao 23:18

I don’t think I made such a broad statement that British were better as administrators. I don’t think I did that. But what I did say was in terms of codifying manuals, preparing systems, rules, regulations, they had bequeathed a rich legacy which changed of course in the last 77-78 years since independence which some things have been changed.

But still the colonial legacy is quite rich in terms of administration. And the example I give is that when I went as a young sub-collector to Parvatipuram subdivision which was part of the Madras presidency during the colonial rule, I just wanted to get a comprehensive understanding of the subdivision of the people’s sociology, anthropology, geography, history of that place. And I asked around.

There was no one document where all this was available. I could look at 50-60 reports but that was an inefficient way of learning. And what I realized what the gazetteer prepared during the British administration was in fact still remained in the early mid-1970s still the best source of information at one place of the subdivision.

So that’s the legacy I was talking about.

Siddhartha Ahluwalia 24:44

And that’s why because those folks went in so detail to understanding the public which you mentioned. They were able to govern effectively for a long period of time though intent was not pure.

Dr. Duvvuri Subbarao 24:56

Yeah. We’re not talking about what was the motivation for them but you’re right. One thing we have to recognize is that during the colonial era, district administration was much simpler. There was no development dimension to it.

Just two functions collecting taxes that we talked about earlier and maintaining law and order. And they took that quite seriously and they built systems and processes, some rules and regulations, prepared manuals, prepared gazetteers which came in handy subsequently. We benefited from that.

Siddhartha Ahluwalia 25:30

Like I come from a tier two city called Meerut, near Delhi. And I still see the IAS officers, they have such old colonial houses that they still can. So I feel that and if you are a part of the new central government and you also described in your book that once you the first posting at center you had one room house.

So it’s quite a stark difference.

Dr. Duvvuri Subbarao 26:03

That is true. That is the culture of the district administration which started with the British colonial rule. And that inheritance, that properties they built for the district officers survive even today. And I wouldn’t say there’s anything particularly negative about that.

It is important that the district officers have comfortable living accommodation, comfortable office accommodation, that’s fine. But much of the administration at the state level and at the central level had expanded significantly and there were no houses during the colonial time. They came to be built afterwards and the Indian government after independence built housing for civil servants but they’re typically smaller.

I was talking about a one-room tenement apartment in Asia house on Kasturba Gandhi marg that where we lived for more than one year.

Siddhartha Ahluwalia 27:04
And your kids went to school from there.

Dr. Duvvuri Subbarao 26:25

Yeah, our children went to school across the road in Bharati Vijay Bhavan school on Kasturba Gandhi marg.

Siddhartha Ahluwalia 25:49

And you later shifted them to airforce school.

Dr. Duvvuri Subbarao 25:55

And I must say that since that has come up both schools were excellent and my sons have done very well. They enjoyed going to Bharati Vijay Bhavan school as well as Air Force Bal Bharti and I think they benefited from the education there.

Siddhartha Ahluwalia 26:08

I think in 1970s once you describe in your book, the sense of a duty that was too much like once wife of your subordinate had died and he still came for on the same day for his duty.

Dr. Duvvuri Subbarao 26:25

I was talking about the loyalty and stoicism of district level staff. This particular person I was talking about was what we used to call the daffadar. I don’t know what that is called in other states but in South Indian states we call him the daffadar.

He used to accompany the collector or the sub collector on camps in the office etc. He would be in some sense the gatekeeper regulate your work and all that. We were leaving on a tour and I was leaving at 7 a.m. I think and everybody was there. My jeep driver was ready and there was water kept there in a pot for me to drink on along the way. And then my camp clerk was there at 7 a.m. Typically the daffadar would also come. In fact they come an hour before their appointed time to get ready.

And I found that at 5 to 7 when I came down to sit in the jeep this man was there but he wasn’t getting into the jeep. I was slightly irritated that look let’s go we get started. So why are you standing there?

But I found that for the first time he was dishevelled. He was wearing a crumpled shirt and for the first time I saw him without his turban. I always saw him with a turban.

In other words he never came before me without a turban. And then I realized that something was wrong. So I asked Naidu why you’re not getting in?

Then he told me softly my wife died sir. I said what your wife died and you’re here? He said sir if sub-collector permits I’d like to go.

If you want I can come. I was deeply touched by that sense of loyalty.

You almost cried you mentioned.

Yeah tears came to my eyes. You know I’m not a tears guy but there was a lump in my throat and I realized I was touched by his stoicism, his sense of responsibility and his commitment. And I learned from people like that.

And you still think that of folks who are serving government still carry that same kind of ….

Dr. Duvvuri Subbarao 28:33
I would say that there are still lots of people who have that sort of commitment but at the same time there are lots of people who don’t have that sort of commitment.

Siddhartha Ahluwalia 28:44

And so you turned from a science student initially. You did your bachelor’s from IIT, master’s from IIT, went for the IAS. And you mentioned that IAS is a generalist skill service.

You require generalist skills and in between you developed your skills in economics. At that point in time not many IAS officers was trying to develop their skill. And you took breaks and you even sometimes suffered because of taking those breaks.

Dr. Duvvuri Subbarao 29:23

I wouldn’t say suffered but certainly on the whole I think I benefited. But the reason I went to study was the following. I went to IIT Kanpur.

I think we were a class. You’re from Meerut so you know you know Kanpur and IIT and all that. There we were a class of about 22 or 23 in the MSc physics class.

And we were just you know normally when you what do you want to do after this what are you doing. And about 20 of them said we are applying to US universities for PhD and we will go there and we will get a PhD. And if we don’t get a PhD admission we will see what happens. We’ll probably go to Indian universities for a PhD and about two or three of them said we will, you know, join the public sector or join my father’s business or whatever like that. I was the only one who was going for the IAS, okay. So, then I joined the IAS, I worked as sub-collector, I spent four years in the service, two years in training and two years as sub-collector.

By then, some of my friends who went to the US were actually completing their PhD. And then, you know, a thought framed in my mind and it developed, which is that, you know, all these people are getting PhD, I stopped my education, perhaps I should study further. And then I said, okay, if this is the best time to do it, because if I defer this, I will have additional responsibilities, I’ll grow higher in my career, I’ll probably get married and I’ll have family responsibilities.

So, this is the best time to go. And that’s when I took time off, applied to the US universities and went to study. The question was, what do you study?

I could have continued physics, but then I decided that since I’m going to continue in the IAS, perhaps studying physics is not the best thing to do, economics will help. So, I went to study economics.

Siddhartha Ahluwalia 31:28

And you mentioned at that point in time also in your book that, right, how you saw America as a country of plenty versus India as a country of scarcity.

Dr. Duvvuri Subbarao 31:37

Yeah, and all of you, we all live in this country, India, we experience this. I was talking in the context of an experience that I had, you know, as a student, and even after I got into the IAS, I was quite, I used to travel by buses, trains, and we know that our buses and trains are crowded. It’s difficult to get into them.

So, with the result that a seat or even standing space in a bus or a train, we treated that as a scarce commodity. Our mental framework was to treat them as scarce commodity. We attached a lot of value to be able to get into a bus.

And the bus would not stop, it’ll go away. So, you had to rush and get in to get that scarce commodity. With that mental framework, I went to the US, went to a large campus, and there was a campus bus.

You know, in the first week I went there, I was standing at the bus stop. There were about 25 others standing along with me. I was, there was no line there at all.

And when the bus came, I pushed everybody aside, try and get into the bus as soon as possible. And other students saying, you know, looking aghast at me, what is this uncivilized behavior? Who is this guy pushing us away?

And how, why is he behaving so roughly and so crudely? Then after having lived there for about a couple of months, I realized that a seat on a bus on a university campus is not a scarce commodity at all. The bus will stop until everybody has got in.

Most of the time, everybody will have a seat. And all the time, you’ll have at least a standing space. So, the mental framework that we have, which is conditioned by scarcity, could not adjust to the plenty that was in the US.

Siddhartha Ahluwalia 33:32

And one other interesting incident that you mentioned is your thesis advisor called you to a cocktail party.

Dr. Duvvuri Subbarao 33:39

Right, right. Yeah. Again, you know, cultural differences, all of us experience.

You know, my thesis advisor, my guide, he was having a party and he invited me and you know, his colleagues, friends, students, they were about 50-60 people on a summer evening and just said cocktails. So, I went to the party and I was, you know, having a good time. Then some other friends were there.

I was talking to my thesis advisor, but another friend of mine along with his girlfriend came to him, Dick Meyer, who was my thesis advisor, and he said, Dick, we’re going. That was about 45 minutes into the party. And Dick was about to say that, whatever, but then I blurted out, aren’t you guys staying for dinner?

Not realizing that a cocktail invitation does not necessarily mean a dinner invitation, okay, that dinner does not follow cocktails. Whereas in India, it wasn’t in our culture or tradition to invite somebody just for a drink or for whatever. You invite them for a meal.

A meal is taken for granted. So, I realized that I made such a bloomer that I wanted the earth to, you know, fall apart and take me in. But of course, everybody understood after that.

Siddhartha Ahluwalia 35:04

And you have one chapter dedicated to, has IAS failed the nation? Yeah. Would love to know more.

Dr. Duvvuri Subbarao 35:08

Yeah, that’s a broad-based question. Actually, it is not a chapter, but an op-ed piece that I had written in a major newspaper, which I reproduced in the book, has the IAS failed, which was, you know, the motivation for writing that editorial piece was the following, that the IAS was instituted shortly after independence as a successor to colonial era ICS as a response to the enormous task of nation building in a poor society, which is embarking on an experiment of democracy. It was unprecedented in history. So, it was a huge task.

And that, the task of delivering on that was fell on the IAS. In the event, the IAS in the 1950s, in the 1960s, even in the 1970s, in the early years of my career, developed a system of development administration from the green field, as it were, and delivered enormous, fantastic results in terms of development administration, which became a role model for many developing countries. And the IAS built a formidable reputation for commitment, competence, integrity.

But that reputation started unravelling in the decades after that. Ineptitude, corruption, inefficiency, incompetence, callousness, had all crept in, for many reasons. That was the motivation for me to write that op-ed piece, has the IAS, which was instituted with such great expectations, failed the nation.

Siddhartha Ahluwalia 37:03

And what do you think has been the primary cause for it?

Dr. Duvvuri Subbarao 37:07

See, several things are difficult to put, you know, identify one single cause. Lots of committees and commissions have gone into this.

There are many things we have to reform in terms of recruitment, in terms of IAS, which is recruitment, career management, induction training, in-service training, opportunities for specialisation. All of those have to be reformed, need to be reformed. But even after all that, if you ask IAS officers, what is holding you up, the most common response you get is that we want to do good things, but local politics, politicians are stopping us from doing good things.

I don’t think that explanation will wash, because the stereotype view is that the politician is all bad and the administrator is all good. I think that stereotype view is wrong. There are good and bad among politicians, there are good and bad among IAS officers.

If in fact the IAS officers collectively stand united and say that we will not do anything irregular, illegal, or we will not compromise our integrity for short-term political benefits, if all of them perform to that code of conduct, the IAS will stand. But that does not happen. Individual IAS officers fall prey to that temptation.

And, you know, as some officers fall prey, others follow suit, and the entire system got eroded. In my view, the biggest problem in the IAS is a wrong system of rewards and penalties. There is not enough reward for good performance, there is not enough penalty for bad performance, and that system of rewards and penalties has to be reformed.


Siddhartha Ahluwalia 39:10

So, you have served as an administrator in state in Andhra Pradesh for a very long period of time under various chief ministers. If you have to go back and, you know, summarize what led to where Andhra Pradesh is today in terms of development, in terms of, you know, what are the policies that worked for Andhra Pradesh to where it is now. So the question is, right, how did the current Andhra Pradesh get formed?

Dr. Duvvuri Subbarao 39:37

Well, I think it’s because of the effort of successive governments, successive chief ministers, there were some poor chief ministers, there were some good chief ministers. But I think what any country at a point of time is, is a result of leadership over decades. Similarly, for a state, Andhra Pradesh, for example, today what it is, is because of the record of performance of successive governments and successive chief ministers.

Siddhartha Ahluwalia 40:09

And particularly the right example is Hyderabad, right? How Hyderabad was able to attract the headquarters of some of the biggest organizations globally in India, like Microsoft came, Indian companies set up their bases, IT companies set up their, Indian School of Business was brought to Hyderabad.

Dr. Duvvuri Subbarao 40:33

Yes, that is true that Hyderabad, Mr. Chandrababu Naidu, chief minister, saw the potential of information technology, business education, much before most other political leaders, indeed, even most other civil servants saw it.

Siddhartha Ahluwalia 40:51

I think the difference that you pointed out in your book was that he was educated, more educated than the other chief ministers. So rather than, he also focused on populist schemes, but developing Hyderabad became his, one of the key agendas.

Dr. Duvvuri Subbarao 41:05

Yeah, he was more educated, certainly than previous chief minister, but he was also more educated among his peer chief ministers compared to other states.

Siddhartha Ahluwalia 41:15

And you have focused a lot in your book, on tribal bills, early in your career, and a lot of attention has not gone towards developing tribals, like for example, one of the bills that you talked about in your book, like was land transfer bill from tribals to non-tribals. And in your second stint, I remember, because of the impact of the first stint, you carried over some biases in the second stint which harmed. Can you share more about that?

Dr. Duvvuri Subbarao 41:50

Yes, my first posting in the IAS was a sub-collector Parvati Puram, which is in north coastal Andhra Pradesh. I am talking about the mid-1970s, when the Parvati Puram subdivision was, you know, the Naxalite movement came there. Naxalite movement started in Naxalbari in West Bengal, but hopped over Odisha and the, it came to Sikakulam Parvati Puram subdivision, in part because the tribal population of the Parvati Puram subdivision became vulnerable to extremist ideology or extremist action, because historically they have been exploited.

They lost their lands because of indebtedness, they became bonded labour because of indebtedness, and they lost their properties, their incomes, and they were living a poor life. That is why they were influenced by the extremist ideology. By the time I went to sub-collector, the Naxalite movement had died down and we were in the reconstruction phase.

Quite predictably, the government decided that if tribals fell prey to extremist ideology, the way to wean them away from that is to focus more on their development, improving their livelihood, improving their income levels, improving their quality of life. So, we implemented lots of development schemes for tribals, including education, health, drinking water, etc. But one of the things I realized was that tribals had lost land, they had become indebted.

Why was this happening? When I looked, I found that there is legislation on paper to protect tribals called protective regulation. It came from not independent India, from British colonial times.

The gist of those regulations, one or two, I’ll tell you, which is that any transfer of land from a non-tribal to a tribal is null and void. So, for example, if you are a tribal, I’m a non-tribal, you borrowed money from me, I am a non-tribal and lend money to you and you are not able to repay that, I grab your land. And then when you ask for your land back, I say give me back my money.

Under the regulation, any loan from a non-tribal to a tribal is null and void. Any transfer of land from a non-tribal to a tribal is null and void. A very simple regulation, not much evidence required.

If all that a tribal had to do was to come to the district administration, maybe the sub-collector and say that I’ve lost my land, but did you borrow money from him? Yes, I borrowed money. Okay, I can write off your loan, I can restore the land to you.

I said, this is so simple. In spite of this, how come thousands and thousands of tribals have lost their livelihood? I said, oh, maybe my predecessors had other priorities, I will implement it.

So, I went around from village to village in the early months of my tenure as sub-collector, telling tribals, no, I’ve come, there is this legislation, why don’t you come and petition to me, I’ll restore land to you, I’ll write off your loans. I expected to be flooded with requests. In the end, nothing happened.

I realized from that experience, I said, why are they not coming? I realized that they cannot afford to complain against the non-tribal, complain against the local money lender, because they’re their lifeline.

I can write off a loan once, but tomorrow, if their child falls ill, or they’ve got to perform a wedding, or a festival, or a cremation, where do they get money from? The local money lender. So, if they complain against the money lender and alienate him, he will not lend to them again. So, they’ve lost a lifeline.

So, I realized in my young days that youthful enthusiasm does not do. You’ve got to understand the problem. You just cannot say that I’ll remove money lenders.

You’ve got to ensure that there’s an alternate source of revenue for them, a loan for them. You’ve got to improve their livelihood. So, that’s what I realized.

That was one part of this. Do you want me to continue the story? Okay.

So, that is one lesson I learned early in my career. About five or six years later, I moved up in my career, became Collector of Khammam District in the combined state of Andhra Pradesh. And that district again had a significant proportion of tribal population, and a large chunk of tribal tracts.

With that experience of earlier protective legislation, I dived headlong into trying to implement protective legislation, even in Khammam. And that project aborted within nine months I was transferred. When I reflected on that experience, I learned a lesson, and I write about that in the book, that perhaps I was too hasty.

Perhaps I did not study the problem in detail before I dived into it. Perhaps I should have consulted my team, prepared a more detailed action plan, mobilized my team for it. I spent more time understanding the field situation, instead of diving straight off into it.

And whether in the process of trying to win the battle, I lost the war.

Siddhartha Ahluwalia 47:42

And you have also described one incident in your book, where, you know, the time and tide change. For example, once Muhammad Azruddin, the ex-captain of Indian cricket team. Yeah.

Right. You were standing on airport, waiting for a signature with your two kids, right? Yeah.

And your kids ran up to him. He got impatient.

And the other time, you know, when you were the RBI Governor, he was a member of the Lok Sabha. And then he came and shook your hand.

Dr. Duvvuri Subbarao 48:09

He came along with his son.

He came along with his son. Who he said was a fan of me. My sons were his fans.

His son was my fan.

Siddhartha Ahluwalia 48:19

So what a story.

Dr. Duvvuri Subbarao 48:20

It is a story.

It is a movie story. But I wrote that story to illustrate the ebb and flow of life. It’s a common, I mean, everybody has some experience like that.

But I wanted to illustrate that.


Siddhartha Ahluwalia 48:34

I want to just, you know, now focus the last five minutes of our interview as we are coming to a conclusion of your last five years of service to the Indian government as a RBI Governor. If you can tell us what led you to becoming the RBI Governor, how your name was nominated and how you were chosen for that.

Dr. Duvvuri Subbarao 48:55

Yeah. So thank you for asking that question for many reasons, particularly because lots of people have asked me, how come you went from the IAS to becoming the RBI Governor? And I struggled to answer that question, because if I say, look, it is because of being in the right place at the right time, it would come off as being falsely modest.

If on the other hand, I said it is because of my track record, experience, competence, etc., it will come across as being boorish or boastful. So I tried to nuance the response and in the event, do not end up giving a satisfactory answer. But I want to say that this book is not supposed to be a guidebook or a magic formula for getting from the IAS to the RBI.

But I do hope that my story, as I say in this, will have some instructive value for young professionals who are aspiring to climb up the career ladders, whether in the government or in the private sector. And also as they move along in life and in their career, what lessons can they learn from my success, my failure, my hopes and my despair, my mistakes and misdeeds.

Siddhartha Ahluwalia 50:13

And what are some of the key decisions as a RBI Governor that you took?

Dr. Duvvuri Subbarao 50:19

Well, you know, as I said, core responsibilities are price stability, inflation. Inflation was very high for a considerable period during my tenure. So managing inflation, we had an exchange rate crisis or pressure called taper tantrums during the end of my tenure, that was another problem.

Then I tried to deepen financial inclusion. I tried to demystify the Reserve Bank. These are some of the things that I had done or I had to do as Governor of the RBI.

Siddhartha Ahluwalia 50:54

And you joined at a time when the economy was crumbling.

Dr. Duvvuri Subbarao 50:58

Right. Yeah, I mean, it was not crumbling. Economy was not crumbling, but I had joined at a time when shortly after I became Governor, the global financial crisis had erupted and we were affected like every other country on the planet. It was baptism by fire for me.

Siddhartha Ahluwalia 51:16

Yeah. I loved you having on a show.

Dr. Duvvuri Subbarao 51:18

Thank you.

Thank you, Siddharth.

Thank you for coming all the way from Bangalore. I’m deeply touched that you traveled here.

Siddhartha Ahluwalia 51:25

And I loved your experiences that you shared in the book. I am myself inspired.

A four-decade journey varying across so many parts.

Dr. Duvvuri Subbarao 51:33

Thank you very much for saying that. It means a lot to me.

Siddhartha Ahluwalia 51:36

Yeah. It’s been a pleasure, sir, hosting you in a podcast. Thank you so much.


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