Economic history recurs because we don't learn from it: Subbarao

Outgoing RBI Governor says the challenge for Raghuram Rajan is to make RBI a knowledge institution

Amid a debate on whether India's current economic crisis is a repeat of 1991 balance of payments (BoP) woes, RBI Governor D Subbrao today said economic history repeats itself if lessons are not learnt.

"...at least in matters of economics and finance, history repeats itself, not because it is an inherent trait of history, but because we don’t learn from history and let the repeat occur," Subbarao said.

The RBI governor was speaking at a function in the Prime Minister's residence on the occasion of the release of the fourth volume of the RBI history which covers the period of 1981 to 1997, which included the BoP crisis as well.

Releasing the volume, Prime Minister Manmohan Singh hoped that RBI governor-designate Raghuram Rajan would steer the country of the present challenging times.

Subbarao said the challenge for Rajan is to make RBI a knowledge institution.

"How you will use your formidable intellect, scholarship and global experience to shape the Reserve Bank as a knowledge institution that will set standards for how an emerging economy central bank should manage macroeconomic policy in a globalising world."."

As if replying to Finance Minister P Chidambaram's statement that the central banks' mandate is no longer price stability alone, Subbarao said the central bank is committed to controlling the rate of price rise because it cares for economic expansion.

"The Reserve Bank was committed to inflation control, not because it did not care for growth but because it did care for growth."

Chidambram had said in the Rajya Sabha on Wednesday that the RBI's mandate is price stability but it has to be seen in the larger mandate of economic growth and employment generation.

"My government believes that while price stability is indeed important, it has to be in the larger context of growth and employment generation. Let Parliament takes a stand on it, so that the message will go to the central bank," Chidambaram had said.

The volume envelopes the tenures of six RBI governors - part of I.G. Patel’s tenure to begin with, and covering Manmohan Singh, A Ghosh, R N Malhotra, S Venkitaramanan and ending with the tenure of C Rangarajan.