A businessman friend in the city, in an informal, off-the-record chat said the other day: “When foreign investors come to India, they want to meet two people-the Prime Minister and the RBI Governor Raghuram Rajan.” According to him, a meeting with the first is mandatory because Narendra Modi has taken it upon himself to be an ambassador for India, urging foreigners to come here and invest their money here. He promises that he will remove all obstacles and make it easy to do business. Talking to him gives them confidence that India is on the right track.
On the other hand, Rajan inspires trust. They feel that the ship of Indian economy is being steered not just in the right direction but with a firm hand. They may have some quibbles with the speed in which the ship is moving and even question a few of his decisions – lowering interest rates is one of them – but they know he is a first class captain.
CRONY capitalism has no place in Rajan’s scheme of things. But the government should welcome that — instead, a climate of uncertainty and suspicion is being created around a second term for him.
So they – and indeed, the Indian business community itself – cannot understand the sudden outburst of attacks against Rajan from within the BJP. The most vocal criticism has come from Subramaniam Swamy, who has claimed Rajan is not “mentally Indian” because he has a Green Card (but an Indian passport). This is not a criticism of his economics but questions his loyalty, implying that he does not have the best interests of India at heart. Swamy has further said that Rajan has set off a time bomb that will explode in December, whatever that means.
The worry is not that the maverick Swamy is on a spree against Rajan; everyone is entitled to his own views and the principle freedom of expression extends even to someone like Swamy who makes outrageous statements. The real concern is that the government has not stepped forward and indicated that it does not agree with the newly appointed Rajya Sabha MP. Finance Minister Arun Jaitley has said that he does not approve of personal attacks against anyone, including the RBI Governor, but is this enough? Hardly.
Swamy’s attacks come in the context of the question of another term for Rajan later this year. His first term ends in September and there is no indication that he will get another one. The timing of Swamy’s tirade therefore is significant — it shows that there is some thinking within the party, if not the government, that may be he should be replaced. That is the government’s prerogative, but two questions arise — firstly, why is Swamy going after Rajan? Is this some kind of kite flying to prepare the ground for Rajan’s departure or see the reaction it evokes among businessmen and others? If so, it is a clumsy way of doing things. The business community, even if it is none too happy with the slow pace of interest rate decreases, has been shaken by the manner in which Swamy has criticised Rajan and the government’s somewhat mealy mouthed response. Indeed, businessmen are hoping that this spurs the government to give Rajan another term.
Which leads to the second point— does the government have someone with equally good credentials to take over the job? There is no dearth of talent in India, but so far the choices made by this government to head institutions has been uninspiring.
Rajan not only stands head and shoulders above everyone in his field in the country, he is an international figure. He is respected worldwide in policy circles and when he speaks people listen. Can one think of another such name in India? Why then would the government not want to retain him? And if the government has a difference of opinion with the RBI governor, so what? Central bank governors all over the world are completely independent in thought and action. They don’t necessarily follow government diktats.
The RBI has been an autonomous institution and Rajan has done exactly what his predecessors have been doing—ensuring that the economy does not slip into high inflation. His decisions may displease the government and some in the business community – certainly his insistence that banks clean up their act will bother all the inefficient businessmen who owe banks in the lakhs of crores – but there is no question that his primary intention is to stabilise the economy. Crony capitalism has no place in his scheme of things. But the government should welcome that — instead, a climate of uncertainty and suspicion is being created around a second term for him.
Rajan would have no problems getting another job. He can go back to teaching and will undoubtedly get offers from multilateral institutions. And no one person is irreplaceable; perhaps the government already has a good replacement in mind. But not only would we have lost a highly skilled and brilliant person that we already had, the entire episode would have left a poor taste behind. Swamy has for the moment quietened down, but who is to say he will not start shooting his mouth off again?
