By Alex Frangos and Sudeep Jain

    Punit Paranjpe/Agence France-Presse/Getty Images
    Reserve Bank of India Governor Duvvuri Subbarao at a meeting at RBI headquarters in Mumbai, Jan. 24.

    Sometimes leadership is listening to those around you. Sometimes it’s ignoring what you consider to be bad advice from those same people.

    In the case of Reserve Bank of India Governor Duvurri Subbarao, he decisively picked the latter last year, consistently bucking the recommendations of his Technical Advisory Committee on monetary policy. The committee is made up of economists, academics and former central bankers.

    As inflation stayed stubbornly high, but previous interest rate hikes were biting into economic growth, the Technical Advisory Committee voted against Mr. Subbarao’s aggressive campaign of rate increases, fearing higher borrowing costs for businesses and consumers would plunge the economy into a deeper funk.  At four meetings for which minutes were released, the outside group voted for a total of a half a percentage point of increases, while Mr. Subbarao, with the support of other RBI officials, pushed through one-and-a-half percentage points of increases.

    Overruling the committee, whose votes are nonbinding, gave ammunition to outside critics.

    Surjit Bhalla, of New Delhi-based Oxus investments, and a frequent commentator on economic policy, said the rate hikes were “like a sledgehammer” on the economy that was already slowing. He said that overruling the committee was “damning proof” that Mr. Subbarao’s moves were wrong. Mr. Bhalla is not a member of the committee.

    In an interview with The Wall Street Journal, Mr. Subbarao grew somber when asked what it was like to have to ignore the panel.

    “We have enormous respect for what the TAC has to say, and for the last, let’s say, the second half of calendar 2011, when we continued to raise rates, many of our TAC members had expressed concerns about inflation, but had advised that we must pause, but without any explanation about how inflation would come down. We weighed their advice against our own judgment and acted as we did. I do hope we get some credit for putting it out in the public domain.”

    Pausing to look for the right word to describe the situation, he said: “It’s difficult….It’s certainly something you don’t do lightheartedly. You do think twice before going against their advice.”

    Ashima Goyal, a professor at the Indira Gandhi Institute of Developmental Research in Mumbai and a member of the committee, says despite the differences of opinions, Mr. Subbarao is “very consultative, open to different viewpoints, and open to listening. He believes in transparency. And improving communication with the markets is a very high priority for him.”

    She adds: “There may be disagreements about monetary policy, but it’s an open process and they take feedback into account.”

    As to whether Mr. Subbarao was right to stick to his guns on raising rates, that’s something to leave to historians.

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