Book Spotlight: Rahul Bajoria | The Story of the Reserve Bank of India

Motivation for the book

So, you know, like many of us go through school, you know, we tend to, you know, elementary school be taught about history, which is like 1000, 2000 years old, but you know, there is not a lot of contemporary history that gets taught in school. So, you know, naturally, as a student of economics, and later as a practitioner, you know, I was very curious to know why are things the way they are. And in my work field, I deal with the Reserve Bank a fair bit.

And so I started reading their own history. I mean, the Reserve Bank of India writes its own history, there are five volumes to it. But when I started reading it, I was like, why has nobody summarized this, you know, for a more bite sized, easily digestible amount of content because otherwise it's 10,000 pages.

So it basically started as a as a curiosity project. But then when I spoke to a lot of people who were say, ex-RBI, including governors, deputy governors, they said it's a good idea to, you know, kind of bring it into a way where, you know, common folk and people who are not necessarily practitioners in in the field can also understand what the institution is all about.

Takeaways for readers

So for me, personally, you know, going through the book, it wasn't that I was a subject matter expert. I mean, I literally read the history of the RBI while I was writing the history of the RBI. So from that perspective, for me, it was a journey of, you know, understanding the nuances and understanding why the central bank, you know, is the way it is and how did in various economic issues, you know, that modern independent India kind of faced in the last, say, 75, 80 years, what was the role of the central bank?

So it's basically looking at the modern Indian economic history. But from the lens of the Reserve Bank of India, that is what I hope, you know, the reader basically gets is that, you know, they are sort of seeing things, you know, kind of unfolding and economic events unfolding from the lens of the Reserve Bank.

Themes explored

So you know, maybe three key things that come out.

First of all, the Reserve Bank of India, you know, really is among the very few islands of excellence that the government of India has. I mean, as we know, that state capacity has always been an issue.

Now, the Reserve Bank itself is older than modern independent India. You know, it was set up in the mid 1930s. And you know, it was initially set up as a way for the British, you know, the colonial British power to kind of control the monetary policy and monetary conditions in India.

Later on, you know, there were multiple roles which were added. So you know, the Reserve Bank has actually kind of, I would say, a much larger mandate compared to other central banks. And you know, that comes across very clearly.

And it has frankly done a pretty good job, you know, over the years, managing this, you know, complexity in economic management. The second key thing that really comes out about the RBI is that it has a tendency to kind of, you know, get more powers and, you know, kind of go through these processes of economic volatility and, you know, a fair amount of turbulence. But then typically speaking, the central bank gains, you know, more regulatory powers, but also tends to not repeat those mistakes.

And so from that perspective, the central bank really is learning by doing institution in the way the policy has been set up. I think the third key thing, you know, one really probably does not appreciate so much is that the financial sector in India and obviously the RBI in a way is, you know, the keystone on which the entire edifice of the financial system is set up. India's financial system is far more developed than what our underlying economic development situation is.

And so the book kind of, you know, brings out this aspect that the RBI has been fairly forward looking and very, very, you know, progressive when it comes to, you know, adopting technology, adopting, you know, regulations which are very consumer friendly while growing the sector, you know. So these are some of the aspects which I would say are quite useful to understand when one reads the book.

Why the book matters today

So it matters with what, why it mattered to me, you know, when I started to kind of read about the RBI and read about and start writing about it, essentially because, you know, as young kids, you know, we don't get taught a lot about a modern Indian economic history.

And there's almost a movement, I would say in the last 15 years or so to write more about what has happened to the government, you know, what has happened with the Republic of India, what has happened with the economic side of India, you know, at least from a 50-75 year lens. And there, I would say, the central bank really is a key figure, right, to understand economic policy and understand monetary policy and understand exchange rate policy. And these are very, very critical things which affect us on almost a daily basis.

And so for any young person who's interested in understanding why India's economic system is the way it is, you know, they should have a genuine curiosity to learn about the monetary system and the institution which largely drives it. And so it's a very useful reference point for people to understand modern economic history in India, but from the lens of Mint Street.