Personal testimonies of central bankers written in real time are few and far between, especially for large emerging economies. Viral Acharya’s account of his efforts as Deputy Governor of the Reserve Bank of India to resist the ‘fiscal dominance’ undermining the pursuit of financial stability is both compelling and often moving. We can all learn from his experience, not least because fiscal dominance is growing around the world.
The art of central banking is essentially about balancing conflicting objectives, given the available degrees of freedom in the political-economy context. The author, bringing an insider’s perspective to some of the most hotly contested policy issues in the recent past, presents a comprehensive analysis of the various manifestations of this constant struggle and underscores the need for a wider public debate in the quest for financial stability.
Dr Viral Acharya, one of the foremost financial economists in the world, served as the Deputy Governor of the Reserve Bank of India during a tumultuous period. His insightful speeches on the challenges the Indian financial and monetary system faced always cut to the core of the issues, in simple, direct and extremely readable language. In this book, he brings together the edited speeches along with connecting commentary to explain what the Reserve Bank was trying to do.
Viral Acharya has produced a comprehensive and valuable guide to understanding the multiple issues associated with financial stability and monetary-policy independence—a scholarly presentation linking theory with the issues of the day. Fiscal dominance and its impact on financial markets, monetary policy and regulation constitute the core of the book. Policymakers need to ponder over the concerns raised in the book.
India’s economic reforms since the early 1990s lifted many millions out of poverty. Yet the stubborn persistence of a distorted state-dominated banking sector increasingly threatens the country’s financial stability and growth. Already one of the world’s leading scholars on the causes and treatment of financial crises, Viral Acharya joined the Reserve Bank of India in January 2017, intent on advocating for badly needed reforms.
This thought-provoking and lucid collection vividly portrays a key policymaker’s frontline battles to influence major policy debates in India. Dr Acharya’s intellectual rigour and honesty, along with his humility and grasp of practical realities, shine through in these speeches. It is fascinating to read his carefully considered views on how best to design and implement much-needed reforms to India’s financial system.
Speeches by Reserve Bank deputy governors are generally used as the vehicle for public expression of the bank’s thinking on issues. Dr Acharya’s speeches are different. They reveal his deep concern on several matters connected with the financial system and often his impatience with the pace of change. This is what makes them interesting and provocative.
Viral Acharya was the Deputy Governor of the Reserve Bank of India during a very interesting period when debates were raging about the autonomy of the central bank and the stability of the financial system was under severe threat due to the proliferation of non-performing assets. With regard to these and other issues, Viral Acharya’s speeches in various forums were very frank, thought-provoking and received a critical acclaim from the discerning public.
Viral Acharya’s latest book represents distilled wisdom on how fiscal dominance can threaten financial stability. Combining both passion and rigour, it’s built on his prodigious academic knowledge, research and global experience in interacting with regulators and central bankers after the global financial crises as well as his practical experience as a deputy Governor of the reserve Bank of India. The book also contains constructive prescription for reform and is a must- read by all concerned with the dynamics of policymaking, especially central bankers.
Th e precipitous erosion of public sector bank balance sheets and consequent fall in bank lending growth in India in recent years are arguably the key causes of the country’s very concerning economic slowdown. Th is collection of erudite speeches delivered by viral Acharya in his all too short tenure at the reserve Bank of India is a very timely, important, closely argued and a passionate plea for all the measures that need to be taken to restore financial sector health, stability and growth in India.
Dr Acharya’s passion for making a difference in the monetary and regulatory history of Reserve Bank of India comes across through the pages of the book. He has produced a unique book that is informative, analytical, contextual, and without doubt, a lasting contribution.
Professor Acharya argues pursuasively that India's original sin is fiscal dominance... (This) erudite work will be useful for any student of the Indian economy (as well as the mandarins in the Finance Ministry). It teaches, but in a very readable way.
The conviction and concern with which Viral narrates the frontline battles of a policymaker to influence economic policy debates is the second reason I commend this book. The earnestness with which he writes about them is both endearing and compelling.
Dr. Viral Acharya seamlessly combines theoretical first principles with market realities and policy prudence. He demonstrates how inextricably the financial, the fiscal, the regulatory and the external are connected and provides a unifying theme to understand their recent evolution. Fiscal policy and the financial sector will be at the fore during and after COVID-19, making this book particularly timely and relevant.
Viral Acharya is a straight talker. Even when he was in office, he was never diplomatic while delivering his speeches. They were not uniformly liked but he didn't change his style. While fiscal dominance is the central theme, the book is also replete with micro details of how the system is gamed by different stake holders.
Viral is perhaps very humble about the contribution of his book to the macro and finance literature. A huge contribution of Viral's book is to broaden the definition of fiscal dominance - beyond its effect on monetary policies, and to include the effect on financial regulations more broadly. This is especially important for a full service central bank of a large emerging market like India.
"The solutions Acharya offers are many, and policy-makers would do well to have a closer look at the fairly long list provided in the various chapters of the book... a must for students of finance and banking, academics, market participants, policy-makers and the informed citizen."
“Acharya’s book is technical and will be appreciated more by bankers than lay readers. However, he has tried to make the book accessible to readers with an elementary knowledge of finance.”
“(The book) should be made part of any aspiring banker’s essential reading diet.”
“Central banking is somewhere between an art and a science… Acharya's book is an excellent example… Acharya's book is a must read for anyone who wants to understand why change is important and how it is hurting us.”
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