I have just joined in the department of economic affairs, ministry of finance, as joint secretary in charge of World Bank–IMF related work. I am in the seventh heaven of bureaucracy, so to speak. My batch got empanelled as joint secretary a few months back and most of my batch-mates would have gladly given their right hand to be in the place that I have managed to bag. In the IAS, there is a well defined hierarchy of ambition at every level. Everybody wants to come to economic ministries because that is where power and influence reside. Nobody willingly wants to go to a social sector ministry. If you are shifted from an economic ministry to a social sector ministry, it is considered nothing less than a disaster and de-jure demotion. Among the economic ministries, the finance ministry is primus inter pares and the dream of every bureaucrat. Within the finance ministry, given a choice, everybody would like to go to the department of economic affairs because it is the cradle of macro-economic policymaking and a long stint here comes in handy later when you throw your hat in the ring for being considered for the plum position of finance secretary.

Finally, within the department of economic affairs the ‘fund-bank’ position that I now occupy is the dream of every joint secretary. There are innumerable trips to the United States and Europe and it is joked that the joint secretary (fund-bank) is actually headquartered in Washington with the requirement of a few trips to India to keep in touch with the Indian economic scenario. The incumbent can also look forward to a stint in the World Bank or the IMF or at least in the Asian Development Bank (ADB).

This hierarchy of ambition, understood but never openly acknowledged, has created an exclusive club with its own entry barriers. It is difficult to get in but once you get in it is easy to come back, again and again. After your basic tenure in the finance ministry is over, you need not go back to your state cadre, like your less fortunate brethren. There are well established procedures of finding places, related to the finance ministry, where you go and then come back again – the prime minister’s economic advisory council, the finance commission, World Bank, IMF etc. It is like a game of musical chairs between a privileged few, each one of whom is eyeing the final prized position of finance secretary. I can easily take five names this instant, who, like the proverbial bad penny, have managed to come back to the finance ministry repeatedly during the last ten years. To think that I am part of this exclusive club within an already privileged service is really exciting. Maybe someday I can also dream of being the finance secretary!

But hang on, let me correct myself. The finance secretary’s position is not the apogee of ambition of a finance ministry mandarin. It is only a stepping stone to the apogee. The really successful finance ministry babu is one who manages to become the GUV. Not the governor of a state but the governor of the Reserve Bank of India. And boy o’ boy, what a job that is! The finance secretary’s position, howsoever enviable it may be to other bureaucrats, is nevertheless a file pushing job, hardly looked at with real respect by the captains of industry, financial sector experts, economists and the big boys of the media. But the moment the same guy becomes the guv, all that changes. It is as if the person is suddenly invested with an aura, intellectual stature and the right to say the final word about the state of the economy.

News channels compete with one another in giving new interpretations to every sentence uttered by him and pink newspapers publish long interviews with him under the mistaken impression that whatever he says should immediately become part of economics textbooks. Sometimes I marvel that even in Hindu mythological stories, those given a boon by the gods were not transformed so suddenly and magically into a state of venerable existence! They had to work the boon before they acquired their new status. But obviously modern political boons are more powerful than mythological boons. No sooner than a person is appointed as the guv, he acquires an intellectual stature only a notch below that of John Maynard Keynes or Milton Friedman! And the good part is that you do not have to expound a brilliant economic theory or write a book.

These days I assiduously follow whatever the guv says or doesn’t say and watch him with interest whenever he comes to the North Block to meet the finance minister. I want to get a good handle on what his job is. Since I secretly dream that someday the political gods would make me the guv, I increasingly like the prospect of doing a job which doesn’t require you to do much. I do not want to sound flippant but the more I think about it the more puzzled I become about the substantive job of the guv. What does he really do personally apart from being the head of a big institution?

As I see it the RBI, as an institution, charts and manages the monetary policy of the country and regulates the operations of banks and non-banking finance companies, an exercise known as micro-prudential regulation. It targets inflation by regulating interest rates and also keeps a hawk eye on the exchange rate, intervening whenever necessary. This is done through a string of operations/instruments such as liquidity management, open market operations, repo rate, reverse-repo rate, statutory liquidity ratio and cash reserve ratio. The governor is assisted by four deputy governors, a number of executive directors, chief general managers, general managers and the usual bureaucracy below. Sure, the governor as the head of this massive bureaucracy provides leadership and coordination, as is the case in all organisations, but almost all the functions of the RBI get taken care of at the level of deputy governors.

The governor’s personal input comes in taking the final call on increasing or lowering repo rate, reverse-repo rate, cash reserve ratio and statutory liquidity ratio. This is damned important for the country but hardly difficult for the governor personally. Just consider this. If the market expects the RBI to raise or lower repo rate by 50 basis points (and the RBI committee also recommends this) but the governor increases it by only 25 basis points, then heavens are not going to fall. Worse, governors can move in the direction opposite to the one expected by the market and get away with it. I watched with alarmed interest when the present governor kept on increasing the policy rates in 2011 apparently to fight inflation even when it was clear that since a large part of inflation was due to supply side constraints, increasing interest rates was not going to help. And it did not help. What it did instead was to kill growth completely while inflation continued to ignore the governor’s prescription like a recalcitrant child. Did it make any difference to the fortunes of the governor?

Hardly! The beauty of economics is that you can theorise and rationalise anything under the sun. Now the rates are up and inflation remains high, so how can the RBI reduce the rates, so goes the logic. The government finds it difficult to reduce the fiscal deficit (as it has many open-ended pro-poor programmes) but wants the governor to reduce the rates to kick-start the economy. The governor says he is only protecting the poor (as inflation hits the poor the most) by not reducing the rates and wants the government to first bring in fiscal discipline. I am reminded of poor Shurpanakha in Ramayana who went back and forth between Ram and Lakshman before Lakshman cut her nose. Here the country’s economy is the Shurpanakha and both Ram (the government) and Lakshman (the governor) are cutting her nose repeatedly! Boy, I love this job. You can get away with murder.

One part of his job though is quite tough. It is to lecture countless industry and merchant chambers events, university convocations and other such bodies and say the same thing again and again in a new way, each more obtuse than the earlier. You have to be good with words and excellent in giving an intellectual spin even to a wrong call. I must develop this quality aggressively if I have to be a successful governor. These staid government jobs have become quite dangerous recently what with the CAG, CBI and CVC constantly breathing down our necks. The governor is free from all these irritations. After all there cannot be any penalty for intellectual misdemeanours. Boy, I love this job!

My reverie was broken by the persistent ring of the telephone. It was the finance minister’s office asking me to prepare a brief for the finance minister for the forthcoming meeting between him and the governor. Do they really need me to prepare a brief?