The Monsoon Musing of the RBI Governor. Another one from the Wall Street Journal Blogs.

RBI’s Subbarao Chases the Monsoon

A late monsoon saved former Prime Minister Rajiv Gandhi an election, quipped journalist Pritish Nandy to author Alexander Frater in his delightful travelogue “Chasing the Monsoon,” in which the author journeyed through India along with the monsoon clouds in the late 1980s.

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Reserve Bank of India Governor, D. Subbarao.

Reserve Bank of India Governor Duvvuri Subbarao probably knows how Mr. Gandhi felt.

In his role as the country’s central banker in chief, Mr. Subbarao is responsible for adjusting interest rates as necessary to stimulate economic growth but subdue inflation. That’s a tough job at the best of times but it’s made a lot easier when there are good monsoon rains, which make agriculture bountiful, suppressing food prices and benefitting the majority of Indians who still depend on the land for a living. When the monsoon is bad, the opposite happens.

Some 60% of farmlands in India are rain-fed. India’s output of summer-sown crops fell in 2009 after the country received its lowest rainfall in 37 years. By December, food prices were up more than 20% from the year before, hurting the economy.

All RBI governors face this problem. But it has a special resonance for Mr. Subbarao, as he discussed with reporters last week during a trip to the southern city of Thiruvananthapuram in Kerala to attend a central bank board meeting.

Mr. Subbarao, who topped his civil service exams in 1972, had his first posting as a sub-collector in the southern state of Andhra Pradesh, which is also his home.

District collector and sub-collectors play an important role when it comes to rains and water. They assess the ground situation to declare whether to declare a drought and they decide when to declare a flood – two events often generated by the monsoon rains, or lack of them.

It was during that time that Mr. Subbarao realized “my emotional well-being, my career prospects depended on rains,” he said at the RBI function.

Nearly four decades later, he remains hostage to the monsoon.

“Now at the end of my career as the Governor of Reserve Bank, I realize that (my) entire performance will depend on rains and not what I do about interest rates,” Mr. Subbarao said. “If there is good monsoon, it is ok. Otherwise the Governor of the Reserve Bank is to be blamed.”

Fortunately, this year the signs are good. The monsoon has further advanced into more parts of the Bay of Bengal, the weather department said in its latest update last week. Rains are expected to reach the southern state of Kerala on May 30, India’s weather bureau chief Ajit Tyagi said Thursday.