From former finance minister P Chidambaram to Infosys founder Narayana Murthy, from bankers such as Usha Thorat and Shyamala Gopinath to retired bureaucrats K Sujatha Rao and Shankar Acharya, the authors of this collection of essays are an intriguing mix.
Apparently, a single question led to the compilation: How would senior Indian professionals whose working lives began in the early decades after Independence share their work experiences in a changing country with their grandchildren in the 21st Century?
Edited by economist, bureaucrat, governor of the Reserve Bank of India from 2003 to 2008, former chairperson of the Finance Commission of India, Padma Vibhushan Y V Reddy, along with former banker Ravi Menon, journalist Shaji Vikraman and writer Kavi Yaga, Work, Wisdom, Legacy: 31 Essays from India explore through the eyes of prominent Indians the idea of why we work, how success and failure are defined, and the interchange of values and ideas between the professional and personal spheres.
So there are reflections on the civil service, on institution-building, on collaborative successes and on when it’s time to quit. The first chapter is a powerful exposition by economist-writer-politician-journalist Arun Shourie titled ‘Never Give Up, Fight to the End: Lessons from Changing Professions, Losing Jobs, and the Ups and Downs of Life’.
In ‘God Laughs And Other Reflections’, the introductory essay from which this extract is drawn, Reddy presents a series of vignettes that dwell on intellect, integrity and policy design with the poorest in mind; he recounts incidents and key moments in his career, all with wit and humility.
Excerpt
No Need to be Anti-Rich to be Pro-Poor
As a government officer, my father would visit the villages in his jurisdiction. Despite his stature, he would sit with farmers and talk about their problems in local gathering places. He showed his deep empathy for the poor. During my vacations, I would accompany him. My father’s concern for the common man influenced me greatly. As a student in Anantapur, I had shared a hostel with young men from poor families, and this close experience also had a deep influence on me.
As RBI Governor, while crafting monetary policy, we understood how sensitive the poor were to risk. We understood the importance of extending formal financial services to their households because the poor relied greatly on social and non-formal systems.
The RBI kept in mind the interests of depositors (the vast majority of whom are usually poor or middle class and retirees). In my five years, we increased the policy interest rates, and one effect of this was that depositors could get more money for their bank deposits. Increased policy interest rates also put pressure on financial institutions and markets to reduce their margins and increase their efficiencies. Obviously, this was carefully balanced to ensure growth with equity.
The RBI also made financial inclusion a big thrust during my tenure. We introduced the banking correspondent system to bring banking to the people. The ATM is where the rich and the poor stand in the same queue. ATMs were important to the RBI and we worked on reducing or abolishing fees for using them, benefitting both rich and poor.
Pro-poor does not mean anti-rich. There is no need to be anti-rich to be pro-poor. I wanted to be seen as not unfriendly to the rich, while being concerned about vulnerable people.
In 2008, the housing market bubble in the US burst, triggering a major global financial crisis. The prevailing view of the US central bank was that since asset bubbles could not be accurately defined, it was best to manage them and clear them up after they burst. In India, we took a different approach. At the RBI, where I was Governor in the years leading up to the crisis, we were unwilling to risk the bubble that we sensed was ballooning in the real-estate sector.
We felt that the gains from the bubble went disproportionately to the financial sector, while the pains of a burst bubble would be borne disproportionately by the middle class and, eventually, the poor. (This proved to be the experience of the US.)
Keeping this in mind, the RBI strengthened the stability of our financial systems and ensured liquidity. For example, we restrained our banks from giving loans and from investing in equity markets and real estate. We increased the risk weightings on commercial realestate construction, thereby requiring the banks to keep aside almost double the amount of capital in reserve. We increased interest rates, anticipating inflationary pressures, and one of the consequences was that house loans became more expensive, thereby reducing the demand to buy houses. For every loan, we made banks put aside extra capital. We used these and several other direct and indirect measures to balance between many factors to ensure growth while
constraining undue risk, especially to the vulnerable. (In general, I believe the financial sector can only follow or facilitate, but should not lead growth in the real economy without disproportionate risk. When in doubt, I looked to international experience.)
Needless to say, the ‘stringent’ measures by the RBI were deeply unpopular with many in the financial sector at the time of their implementation. Financial market wallahs felt they were being unnecessarily restrained, or even penalised.
Then, in 2008, the financial crisis hit. Of course, India did not escape unscathed, but the Indian financial sector was affected far less severely than many other countries. Our banks had liquidity and we could avoid much of the financial instability. This not
only cushioned the vulnerable from shock, but also benefitted the financial sector greatly, as well as the rich. Importantly, the years leading up to the crisis were a period of record high growth rates with price stability, and forex reserves had increased to ensure external sector stability.
Although many factors went into policymaking and decisionmaking at the time, a concern for the vulnerable was a principle that was always at the back of my mind. I believe that this principle can be applied or acted on in different ways, depending on the nature of the job or institution.
For example, a civil services officer is bound by strict rules and procedures. Yet, the officer can exercise discretion within the structure of the rules. In general, any law says that something is prohibited or that something should be done. Between the two, there is a vast area. I used my initiative to tap into this area while I was in the IAS. (This is an important principle that can be used almost universally by public servants.)
For those not in public service, similar areas can be found between institutional rules and guidelines. Capitalism is a system in favour of the few, although it is not necessarily against the many. Often, the balance is tilted towards the rich, but there is no rule that says it has to be so. It is left to the practitioner to decide how to interpret and augment these systems.
(Excerpted with permission from Work, Wisdom, Legacy: 31 Essays from India, published by Orient Blackswan.)
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