NEW DELHI: The speculation has ended. Little over a fortnight after declaring that he did not want spoil to the fun media was having on predicting his future, RBI governor Raghuram Rajan on Saturday announced that he is going back to the academia after his current term ends on September 4, 2016. In a letter to his colleagues, Rajan said that the decision has been taken after “due reflection and consultation with the government.”
It is a known fact that many in the government are unhappy with the way Rajan has been going about with his business. On the other side, economists and industry honchos have even gone to the extent of undertaking a signature campaign seeking a second term for him. “Individuals, however important, cannot be bigger than the institution,” a senior official told Express.
This is precisely where Raghuram Rajan seems to have gone wrong:
(a) He has become too big for his stature, having acquired a larger than life image;
(b) he had steadfastly refused to lower interest rates despite adequate liquidity in the system and prodding by the government, thereby affecting the cost of borrowing particularly for the corporates;
(c) by embarking on a clean up drive, many believe Rajan has almost pushed the Indian banking system to the brink.
In hindsight, a fair assessment of Rajan’s three-year tenure suggests that he has not done anything great, but, at the same time, he has not caused any severe damage to the economy. It is just that he did not mince his words and given his credibility, it carried well with the people. So, when he mocked at those saying Indian economy is doing well by comparing it to “one-eyed king in the land of blind”, he had the gumption to stand up.
As his comment drew criticism from those within the government, he did not become defensive. On the other hand, he gave a derisive reply: “I apologise to all those visually impaired for referring to them as blind.”
Over the past few months, from the government perspective, it was becoming increasingly clear that it would be difficult to deal with someone who had almost acquired a cult status. Sources in the Government suggest that someone who will not damage India’s reputation as a global economic power in the making would be preferred as the successor.
Hints to this effect were given by government officials hours after Rajan made his intentions clear. “We will find someone from within the system as a successor.” In other words, the next in line is one who knows how the Indian system works.