While competence is a minimum requirement for any job, continuity is a virtue in jobs where experience is a vital necessity. Rarely today does the government, at the Central and state level, give much attention to either of these factors in senior appointments. Political patronage plays a larger role and, of late, heads of regulatory institutions seem to come only from the pool of retired civil servants who have served their political masters well. Mercifully, there have been some outstanding exceptions to that rule as the recent appointment of Yaga Venugopal Reddy as the governor of the Reserve Bank of India (RBI) for a period of five years indicates. Not only is Reddy widely regarded as the most competent person available for the job, there will also be continuity in central bank leadership. While his career has been in the IAS, he has earned an enviable reputation for competence in macro-economic management. He earned his spurs in external economic management in the Union finance ministry but came into his own handling the 1990-91 economic crisis as a backroom boy in North Block. It was this record that prompted the then RBI governor, C. Rangarajan, to invite Reddy to join the RBI as deputy governor. The Rangarajan-Reddy duo played an important role in helping India manage the consequences of the Asian financial crisis in the late nineties. Later, Reddy and Bimal Jalan had to deal with the economic fallout of Pokharan-II. While the RBI has been criticised in recent years for its record in banking supervision, there has been universal praise for its management of monetary and exchange rate policy and of the balance of payments. The International Monetary Fund (IMF) has recently praised India’s external economic management. The value of competence and continuity in leadership is underscored by the record of professional leadership at the central bank over the past two decades. Things have changed, however, in the year that Reddy has been away at the IMF. While he was earlier worrying about a depreciating rupee, he will now have to worry about an appreciating rupee. While monetary policy was shaped by low and falling rates of inflation earlier, over the next year he must worry about rising rates. Mercifully, however, he does not have to worry about a balance of payments crisis!
