duvvuri subbarao : reserve bank of india ’ s platinum jubilee celebrations – the outreach programme remarks by dr duvvuri subbarao, governor of the reserve bank of india, at the function releasing the rbi commemorative stamp by smt pratibha devisingh patil, hon ’ ble president of india at the rbi office, new delhi, 16 january 2010. * * * 1. on behalf of the reserve bank of india, it is my pleasure and privilege to welcome your excellency, the hon ’ ble president of india for the release of the commemorative stamp marking the reserve bank ’ s platinum jubilee. this occasion, your excellency, is truly special. this is the first time the first citizen of the country has graced the new delhi office of the reserve bank which has the honour and distinction of having been inaugurated by our first prime minister, pandit jawaharlal nehru. 2. a hearty welcome also to the finance minister, shri pranab mukherjee ; minister of state for finance, shri namo narayan meena and minister of state for communication & information technology, shri gurudas kamat. we are delighted that so many of our past governors, deputy governors, top management of the reserve bank and several dignitaries are here today. a big welcome to all of you. 3. seventy - five years is a relatively short span for an institution. even so, the journey since its establishment in 1935 has been eventful for the reserve bank, shaping not only its intellectual evolution but also securing its preeminent position in the economic policy space of the country. during this time, there have been momentous changes – a paradigm shift in economic ideology, ever new perspectives on economic development, growing aspirations of people, path - breaking financial innovations and game changing technological breakthroughs. all these are changes which have influenced the reserve bank, and changes to which the bank has had to respond in its own unique way. the reserve bank is proud to have been part of every major economic event and policy in the country, and its broad mandate underlines its enduring concern for the larger public good. 4. while a lot of things have changed at the reserve bank over the last 75 years – our functions and responsibilities, and the way we deliver our mandate – certain things have remained the same ; in particular, the professionalism and integrity with which the rbi discharges its mandate. the high esteem in which the reserve bank is held today is owing to the

and debate, and once we collect and analyse comments, we will take an internal view and then start deliberations with the government. all this said, international experience suggests that, ideally, once the central bank ’ s objective is given, and the operational target fixed, the government should leave the technocrats in the central bank to do their job. finally, does the patel committee intend to turn the rbi into inflation “ nutters ” focussed on bringing down inflation to the exclusion of all else, including financial stability? of course not! medium term flexible inflation targetting means that the monetary policy committee focusses on inflation over the medium term, being concerned about too high, as well as too low, inflation. that means it may be willing to overlook temporary inflation spikes ( such as, this bis central bankers ’ speeches november ’ s inflation numbers ) but also raise rates when sustained low interest rates and low inflation increase threats to financial stability – because a financial crisis could lead to deflation. in other words, the monetary policy committee will not put on blinkers and see just the inflation number. a number of emerging markets have adopted some form of targetting, while “ non - targetters ” like the fed target inflation in all but name, including putting a numerical target to its goal of price stability. in the remaining time, i want to present one more issue that has many commentators exercised – they say the real problem is food inflation, how do you expect to bring it down through the policy rate? the simple answer to such critics is that core cpi inflation, which excludes food and energy, has also been very high, reflecting the high inflation in services. bringing that down is centrally within the rbi ’ s ambit. but i will argue that policy is not irrelevant even in controlling food inflation, though clearly, the government also has an important role to play. 1. role of food prices in the high inflation experience of recent years headline inflation measured by the new cpi has remained in double digits during april 2012 to january 2014, averaging 10 per cent over this period. food inflation, which has a weight of 47. 6 per cent in the index, has contributed the largest share of headline inflation ( chart 1 ). food inflation itself has stayed in double digits throughout this period, edging down to 9. 9 per cent only in january 2014. 2. why are food prices high? although domestic production has increased steadily, barring reversals in 2009 – 10 and 2012 – 13,