India at 70: Reminiscences on the Rise of an Economic Power

Copyright: Hudson Institute

Copyright: Hudson Institute

After an introduction by Dr. Aparna Pande, Director of Hudson Institute's Initiative on the Future of India and South Asia, the discussion was handed over to Alyssa Ayres, Senior Fellow for India, Pakistan, and South Asia at the Council on Foreign Relations, to welcome the notable speaker of the day, Y.V Reddy. “He served as the 71st governor of Reserve Bank of India and had a very long career in the Indian Administrative Services,” said Alyssa Ayres. She articulated the agenda which constituted a discussion, followed by a questions and answers session about Y.V Reddy’s “remarkable book that provides insights into India’s economic institutions,” titled Advice and Dissent: My Life in Public Service. Mr Reddy said,  “my book is my version of what I could see and what I could feel,” and “by in large it is a first hand account of the things I was involved in.”

Mr Reddy, who described his career as “part of India that moved from 1947,” went on to inform the audience that “the general impression is that the reforms of 1991 introduced the economic growth; it is partly true but it was a long journey.” To exemplify this,the discussion ranged discussion ranged from the making of modern India in 1947 to its rise as a major player in the subcontinent. He pointed to other reasons for India’s economic growth as the idea that “after the 1970s we did not have war, we seldom calculate the cost of war”  in allowing for a country to grow. He also highlighted that highest growth since 1999s to present times has been during the coalition government's. He asserted that “a coalition produces stronger results in the context of India.”

Alyssa Ayres asked for a comment regarding the imposition of economic sanctions after the first 1998 nuclear tests in India, to which Mr. Reddy replied, in the context of sanctions “we had to discuss whether we should give an assurance to the markets...that we will take care, so we had difference in opinion, my view was the we don’t know the magnitude of the problem,” and “we quickly calculated the possible impact on capital economy, that is capital flow...we calculated the cap, that cap had to be faired up and therefore, we released the special bond.” He continued,“ here it was done without amnesty, it was done in the face of actions.”

On a more personal note he shared that he “ feel[s] in telugu and thinks in english”. While switching gears, the moderator asked for the “tricks of the trade” that seemed to be seamlessly incorporated in his book. She requested a comment on blurring hierarchies through the use of different language mentioned in the book. Mr. Reddy answered the question with an anecdote about his career.  “Early in my career, first let me explain, first five years in service, I had eight transfers. The first thing I learned as a junior officer was in a conference, a big, big boss said something inappropriate”. I said,  ‘Sir, my humblest impression is Sir, that you should not do that Sir.’” He continues, “the problem in the hierarchy is the ego and the second difference arises because of the hypothesis.” He concluded the story by saying “I always avoided unpleasantness.”

The moderator posed a question about credit rating agencies being treated unfairly, to which he responded “if they rate too hardly, they won’t be in business,” and “in reality there is not really competition in the global financial markets, there are a  few credit ratings, and other institutions.” He continued, “the truth is somewhere between what the advanced and developing countries thought.” When asked how to extend financial inclusion to more Indians, he said, “it only became a global agenda after G20 meeting, only after the global financial crisis.” “My idea was money and finance should not only be for financiers,” and  “we have given a licence to a bank to accept non-collator then they should help the people.”

Regarding the biggest risks today in the world, he reminded the audience “how many changes since the financial crisis? Is there a new normal? I’m afraid not,”  and “the old crisis is not sorted out.” He also asserted that “finance is global, regulation is national. How to handle that?” He urged for a “rebalancing process,”  since “the real activity is shifting to the East, finance is in the west, working population is  in the east.” He said, “there will be a transformation of technology and geography in the next decades,” and this will be “ the biggest challenges for the rural economy.”

This was followed by the audience asking questions about China and India regarding the challenges both countries face in terms of development. The questions ranged from the structure of the Indian economy to the effective range of interest rates.

To watch the discussion, click here