From intolerance to new GDP numbers, Rajan had a view on all

Raghuram Rajan

Raghuram Rajan

MUMBAI: An outspoken RBI Governor is rarity but Raghuram Rajan is the one who famously declared in James Bond style – ‘My name is Rajan and I do what I do’ and he had a candid view on all topical issues economic and political.

Keeping up this reputation, Rajan has himself decided to put at rest all speculation about his continuance by saying no to a second term “on due reflection, and after consultation with the government”, but also made it clear he was “open to seeing” through his unfinished work on containing inflation and cleaning up the books of banks.

Be it speaking for tolerance after a Muslim was lynched for allegedly eating beef, comparing the Indian economy with ‘a one-eyed king in a blind world’ when strong growth was the central narrative, questioning the flagship programs or doubting the new GDP numbers, Rajan was often vocal and not in sync with what the government would have liked it to be.

On the lines of Brexit – used for the upcoming vote on whether Britain would remain in Europe or not – the speculation over Rajan’s continuance had already prompted a new term ‘Rexit’.

When BJP’s newly-nominated Rajya Sabha MP Subramanian Swamy questioned whether Rajan was “mentally fully Indian” as part of his tirade against the RBI Governor, the former IMF Chief Economist said he would not reply to “ad hominem attacks” and give legitimacy to “so fundamentally wrong and baseless” allegations.

On his “Indian-ness” being questioned for holding a US green card, Rajan said, “Indian-ness, love for your country is complicated. For every person there is a different way that you show respect for your country… My mother-in-law will say karmayogi is the way to go – do your work.”

In his three-year stint at the Central bank, the vocal Rajan has regularly given candid speeches and often chose his favorite ground of ideas – academic institutions – for speaking his mind on key issues.

He chose his alma mater IIT-Delhi to make a passionate plea in support of tolerance following the brutal the lynching of an elderly Muslim in nearby Dadri over allegedly eating beef, saying tolerance and mutual respect are necessary to improve an environment for ideas and physical harm or verbal contempt for any particular group should not be allowed.

On a day when the RBI signed the all-important monetary policy agreement with the government, Rajan had invoked Hitler’s regime to drive home the point that strong governments will not always drive move in the right direction.

While stating that a strong government should be led by those who have expertise, motivation and integrity and can provide the needed public good, Rajan warned at the lecture in Goa that “strong governments, may not, however, move in the right direction”.

At the same time, his hard stand on cleaning up the books of banks and his insistence to focus more on containing inflation rather than lowering interest rates created much heartburn.

Asked once by a student why the humble Dosa – the South Indian dish – continued to cost high when RBI was claiming a victory over inflation, Rajan blamed it on lack of technology upgrades from its traditional Tawa preparation and high wages of the person making it.

Among his first speeches after being appointed by the previous UPA government in the middle of an economic crisis, Rajan expressed reservations over the export-led focus of the ‘Make in India’ program of the Modi government.

Rajan, who was often called a rockstar Central banker and had rightly predicted the 2008 global financial crisis, opined the world is unlikely to accommodate another country like China, and that we should rather focus on domestic consumption or make for India.

Rajan went public with a critique of the new GDP calculation method as well, which overnight made the country as the fastest growing major economy with a 7.6 per cent growth as against the low 5 per cent when the NDA government took over.

“There are problems with the way we count GDP which is why we need to be careful sometimes just talking about growth,” Rajan told the students of the RBI-promoted Indira Gandhi Institute of Development Research here this January.

But the most contentious of the comments was one comparing the state of our economy with a one eyed king in the land of the blind, which was derided by some Union ministers.

In the face of the wild criticism, Rajan stood by the statement and apologized only to the visually challenged community; if they were hurt by the remarks and pointed out that we are still a poor economy that is home to the largest number of the poor on the planet.

Under attack from various quarters over his ‘one-eyed is king’ remark, Rajan called for raising the level of public dialogue and said people should not look for “insults” everywhere.

“I think we all have to work to improve public dialogue. Speakers have to be more careful with words and not be gratuitously offensive. At the same time, listeners should not look for insults everywhere, and should place words in context so as to understand the intent,” he said.

He also invoked Mahatma Gandhi, saying his famous quote – an eye for an eye will only make the whole world go blind – was also not meant to demean a handicap.

Top industry leaders, including Anand Mahindra, Deepak Parekh, NR Narayana Murthy, Kiran Mazumdar-Shaw and Mohandas Pai, said it will be “nation’s loss” as Rajan brought economic stability and enhanced India’s credibility on the world stage.

Surprisingly, there were no comments from industry chambers like CII and FICCI.
There have been concerns that Rajan’s exit, which has been termed as ‘Rexit’, could lead to adverse impact on the country’s financial markets.

While the Governor did not specifically refer to this, he said in his letter that the RBI would be able to “ride out imminent sources of market volatility like the threat of Brexit.”

He also said that RBI has “made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event”, referring to the concerns that the maturity of these bonds in September-October could impact the markets in terms of sudden pressure on the country’s forex reserves.

Rajan has been generally hailed by the industry and experts, but has been under attack from some, including Swamy and a few other leaders for what they call his failure to contain inflation and lower interest rates to boost economy.

The Governor said he is confident that his successor would take the RBI to new heights.

“I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished.

“While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed.

“Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.

Pointing out to the over USD 360 billion forex kitty, Rajan said it is a record high and reiterated confidence of comfortably weathering the NRI deposit repayments due soon without any hitches.

Like for any other RBI Governor, the most contentious point in the relationship with the Finance Ministry was the rate setting strategy and by raising rates, he behaved contrary to the North Block wishes.

Rajan, however, tried hard to convince that they wanted to help establish credibility to RBI’s ability to reign-in inflation and once he was confident of the shift in the trajectory, started lowering the rates.-PTI

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