Former Reserve Bank of India YV Reddy, in an exclusive interview to CNBC-TV18, said that neither growth nor inflation should drive interest rate policy. Reddy, who recently collaborated with economist Deena Khatkhate on the book 'Of Economics, Policy, and Development: An Intellectual Journey by IG Patel', believes the correct rate is one that promotes savings.
The book was launched by current RBI governor Subbarao at the RBI headquarters on Wednesday evening and is published by the Oxford University Press.
Indraprasad Gordhanbhai Patel (November 11, 1924-July 17, 2005) was the 14th RBI governor and served a five-year tenure from December 1977 to 1982.
Below is an edited transcript of the interview on CNBC-TV18.
Q: What motivated you to bring out this book? What guided you when choosing the chapters? What should we as students of economics try to glean from this book?
A: I have been an admirer of IG Patel even when I was in the university. He impressed me as somebody who has very good grasp of theory and policy and so I read his papers.
And then I found that he has expressed opinion over a period of half a century in different capacities. It is rare and he has spoken after leaving the government for about 20 years and was the director of the London School of Economics.
So, here is an extraordinarily rich source of thought processes from different angles spread over 50 years. It's rare and I thought I should bring it together. Then we had to select carefully and in selecting we made a combination.
For instance, there is one section with three excerpts. All three were after 1991 and they are on reforms. It is absolutely fascinating to read his opinion in 1991, in 1998 and in 2003 when he flagged the question of unease regarding economic reforms.
He warned that reform was not something like a laundry list. Second, real reform cannot happen if you don't take care of the fisc. Even in 1991, in the essay included in the book, he says that