The intrinsic faith in the India story showed itself well on Tuesday when the central bank left the benchmark repo rate unchanged at 6.5 percent and the markets instead of throwing a sulk cheered the no-change by registering a hefty 300-point rise in the Sensex. Neither the markets were selfish, refusing to appreciate the wider developments in the economy, nor was the RBI bothered about the perennial noises from the growth-lobby for a rate cut.
Governor Raghuram Rajan could be relied upon to do the correct thing on purely a priori considerations unmindful of the diverse currents flowing around him. He was mindful of the uptick in retail inflation which had risen to 5.39 percent in April from 4.83 percent in the previous month and did not want to signal a further rise by easing credit flow.
Yet, he did not rule out a rate cut should the monsoon turn out to be right and consumer prices stay in line. His was an accommodative monetary stance, he said. In any case, the five-percent inflation target for March 2017 was in place and the central bank was committed to achieve it. Currency market volatility too was in check, with the rupee gaining a few paise against the dollar following Rajan’s policy announcement. However, the biggest endorsement came from the markets which by now had discounted the likelihood of a rate cut given the uptick in inflation.
However, the good news on the wider economic front seemed to drive the upward movement of the indices. A slew of announcements on the eve of the second anniversary of the Modi Government added to the positive mood stemming from a concerted effort to make the banks clean up their books and the over-leveraged corporates to turn healthy by concentrating on their core businesses.
Though the non-performing assets of the banking sector were making the headlines, the fact was that simultaneously the corporate sector too was engaged in shedding flab and getting its act together. Recklessness of the UPA years when corporates had over-extended themselves on the back of indiscriminate borrowings was now being unwound with some pain but both the borrowers and the lenders are set to emerge healthier after the process is completed.
Meanwhile, the clever man that he is, Rajan deftly deflected the on-going speculation over his second term. Since his current term will end only in early September, interest in his continuance as the RBI chief is pointless at this stage. Besides, institutions such as the RBI are not person-driven, processes and practices established over decades exercise considerable influence.
It is also significant that the relationship between Mint Street and North Block under the NDA is far healthier and mutually respectful than it was at any time when P. Chidambaram had ruled the roost. Therefore, regardless of what maverick Subramanian Swamy says, Rajan and the Government can be trusted to come to a mutually satisfactory decision on the next RBI boss when the time comes.
The Haryana Government seems to have learnt the right lesson from the violent events of last February. Agitating Jats seeking reservations in jobs and educational institutions had indulged in acts of arson and looting in several parts of the State.
Since then though the courts, expectedly, had rejected the legislative measure granting them the sought-for reservations, the renewal of the agitation last Sunday seemed to have petered out. They tried to replicate the events of last February but were put down by a firm hand of the administration. Also, there was more tact and persuasion shown at the political level by the Government, with agitators complaining of a policy of divide-and-rule pursued by the administration.
Clearly, last February the Government was caught napping, not realising how the defeated Congress could instigate Jats to foment trouble. In fact, a key aide of former chief minister Bhupinder Singh Hooda was caught on tape, instigating Jats to organise violent acts so that the Congress could regain relevance. Meanwhile, the fact is that Jats are no longer the prosperous land-owning community they once were.
With fragmentation of land holdings over successive generations and the poor returns on farming, there is pressure of urbanisation and an aspiration for white collar jobs. Growing resentment that other communities are doing better, partly due to the benefits of caste-based reservations, Jats too seek a share in the development pie, keen on better educational and employment opportunities for their young ones. It is a legitimate aspiration which the entire political class has failed to address.
In fact, the economic, social and political repercussions of reservations on those outside its ambit need to be studied in order to devise a new policy paradigm for containing the simmering discontent among the non-reserved categories. The sooner it is done the better, for the problem is neither confined to Haryana nor is it Jat-centric alone.
