As my term as governor of RBI was drawing to a close, I was planning to go back to academia for some time. That would be a fitting way of ending a career which started in academia. However, the closing months were also a difficult period. The impact of the East Asian crisis had to be dealt with. The Indian rupee was under pressure. My attention was focused on that.
At that time, I.K. Gujral was prime minister. I had met him a few times to apprise him of the developments in the financial sector. A few months before my term was to come to an end, the then chief minister of Andhra Pradesh had inquired from Y.V. Reddy whether I would be available and willing to come to Andhra Pradesh as governor since he wanted a non-politician as governor. Krishna Kant was governor then and he was to be elected vice president.
When Krishna Kant was elected, Chandrababu Naidu moved to get a replacement. In fact, I had not met Naidu until I was chosen as governor. The position of governor of Andhra Pradesh was left vacant for some time; some other governor was looking after it. The process of selecting a successor to me in RBI began only after it was decided that I would go to Andhra Pradesh.
The finance minister did discuss with me the various possibilities. In dealing with the East Asian crisis, two factors had to be kept in mind. First, we had not allowed capital account convertibility in any big way. The Tarapore had made a number of recommendations. We were implementing them one by one depending on the conditions. We had taken the view that capital account convertibility was contingent on certain milestones being achieved.
This cautious approach to capital account convertibility was a help. Second, even before I left RBI, I had let the value of the rupee fall. We wanted to make it clear that we were not wedded to a particular rate. This, I believe, enabled my successor to act without any commitment on the value of the rupee. Bimal Jalan was chosen as my successor. He came with long experience in handling economic matters. He was well grounded in theory and action and had handled many problems with consummate skill and efficiency. I had known him from the days I was deputy governor and enjoyed a cordial relationship with him.
I took the oath as governor of Andhra Pradesh on 24 November 1997. It was a bit of a spectacle. Horses and limousines jostled together. I spent some time drafting a speech that was broadcast that evening. Chandrababu Naidu was then a powerful political personality. He had a big role in shaping the government at the Centre. I had decided that my actions as governor would be strictly according to the constitutional provisions. At the time I took over as governor, Naidu was in a strong position in Andhra Pradesh also. He had a clear majority even though the route he chose to become chief minister was controversial. Without doubt, Naidu was a reformer.
He was completely in sync with the liberal road chosen by Rao–Singh. He desired very much to push these ideas at the state level. He wanted to make the state industrially strong. He wanted Andhra Pradesh to be the investment destination of domestic and foreign capital. In a good measure, he succeeded. More importantly, he had a special fascination for information technology. He wanted to make Hyderabad a second Bangalore. The seed that he had sown at that time had grown and the tree is flourishing. In pursuing liberal policies and promoting information technology, I offered my help because of my background. One of his ambitions was to make Hyderabad a financial centre.
(Excerpted from Forks In The Road: My Days at RBI and Beyond by Dr C Rangarajan, with permission from Penguin Random House)
