RBI Governor Subbarao is an IITian and IAS topper

Finance Secretary Duvvuri Subbarao, 59, an Indian Administrative Service (IAS) officer of the Andhra Pradesh cadre who topped the 1972 batch, will be the new governor of the Reserve Bank of India (RBI). He will take over from incumbent Yaga Venugopal Reddy, whose five-year tenure ends September 5.

Announcing this here on Monday, Finance Minister P Chidambaram said Subbarao had been appointed for three years, though the norms allow a tenure of up to five years. By implication, Subbarao term could be extended by two years.

The appointment comes after considerable speculation over who would take over from Reddy, a retired IAS officer who became governor on September 6, 2003.

A key contender for the job was RBI Deputy Governor Rakesh Mohan, who met the finance minister last week. There was also some talk of Reddy being granted an extension.

Today, Chidambaram praised Reddy for his stint at the central bank. “His stewardship of the RBI saw some major changes and improvements. He led the RBI with distinction through a period of change and rapid growth. We warmly thank him for his services,” the finance minister said.

Subbarao has wide experience in public finance and has held important posts in this area. He had joined the finance ministry in May 2007, before which he worked as secretary of the Prime Minister’s Economic Advisory Council.

An IIT Kanpur alumnus, Subbarao was among the first of its graduates to join the civil services. He took a Master’s degree in economics from Ohio State University (1978), was a Humphrey Fellow at the Massachusetts Institute of Technology (1982-83) and later picked up a doctorate in Economics from Andhra University. Among other stints, he was also the lead economist at the World Bank from 1999 to 2004.

Widely seen as a reformer, he is credited with having authored a turnaround of Andhra Pradesh’s finances in the late nineties when the state slipped into an unprecedented fiscal crisis.

He takes charge at Mint Road at a time when inflation is ruling at an uncomfortable high of 12.4 per cent and monetary policy is focused on curbing the price rise and tackling inflationary expectations.

Subbarao is currently overseas on official business and was scheduled to return to New Delhi late tonight.

Subbarao’s appointment as RBI governor means a new secretary, department of economic affairs, will have to be appointed soon because he also held that post. Since he was the senior-most among his peers, he was appointed finance secretary.

Sources said Ashok Chawla, currently civil aviation secretary, may be appointed secretary, economic affairs. Chawla was additional secretary, economic affairs from April 2005 to January 2007. Chawla is an IAS officer of the 1973 batch from the Gujarat cadre.

Meanwhile, Sindhushree Khullar, currently additional secretary in the department of economic affairs, has been empanelled to pick up the secretary rank. She is an IAS officer of the 1975 batch of the AGMU cadre.

The finance ministry has five secretaries. Revenue secretary P V Bhide and financial services secretary Arun Ramanathan are from the 1973 batch. Disinvestment secretary Vivek Mehrotra and secretary expenditure Sushma Nath both belong to the 1974 batch. Even after Chawla joins, Ramanathan would be the senior-most among the secretaries at North Block. He is slated to retire in April 2009. Sources suggest Chawla may eventually be appointed the new finance secretary once Ramanathan retires.

Technocrat Mohan joined the RBI as deputy governor in July 2005 for a five-year term. Before joining the central bank, Mohan, 60, worked as secretary, department of economic affairs, finance ministry, for less than a year. In this position, he was alternate governor of the World Bank and Asian Development Bank. Immediately before this, he was with RBI as deputy governor between September 2002 and October 2004.

It is not yet clear whether Mohan will continue in his present charge. He has two years to go as deputy governor and there is a suggestion that he may be headed to the World Bank at Washington. It is likely that Arvind Virmani, currently the chief economic adviser in the finance ministry, may be appointed as deputy governor in Mohan’s place. (Source: Business Standard)