The tightrope walker

Name: Yaga Venugopal Reddy
Age: 66
Designation: Governor
Institution: RBI

Yaga Venugopal Reddy has always kept his calm in uneasy situations. Unfazed by the conflicting signals emanating from both North Block and the US Federal Reserve in the run-up to the quarterly monetary policy review in January, the 21st Governor of Reserve Bank of India (RBI) did just what he thought was most appropriate at this juncture: he left key rates unchanged.

Clearly, inflation was the top priority for Reddy, who wanted to avoid any asset bubble in the Indian economy where supply is yet to catch up with the rising demand. To that extent, Reddy, a 1964 batch officer of the Indian Administrative Service, has kept North Block happy as the ruling UPA government also cannot afford to go to the general elections in May next year with inflation spiralling upwards.

In fact, ever since Reddy landed at the corner room in RBI Building on Mint Street in September 2003, he has always been faced with one or the other situation arising out of explosive GDP growth, soaring crude oil prices, rising rupee against the US dollar, hot FII inflows and record forex reserves. But he has dealt with all these without creating any hullabaloo, except over the FII inflows, where he reportedly suggested a tax on inflows. The Finance Ministry later denied the move.

But Reddy’s biggest tests lie ahead, as he nears the end of his five-year term in September. It may not be easy for him to keep rates unchanged over the long term as the full impact of the financial crisis in the US begins to be felt across the world and particularly in Asia. Also, with many state elections due in 2008, Reddy will have to keep a strict vigil on the appreciating rupee to keep exports from collapsing. How he stands up to these challenges will be keenly watched by experts in India as well as abroad.

— Anand Adhikari