The proverbial cat has been set amid the pigeons. This week, the inimitable Subramanian Swamy, a master of intrigue, declared that Reserve Bank of India Governor Raghuram Rajan was not fit for the job. More to the point, he observed that the professor-on-leave may well be sent back to Chicago.
Swamy is not a lone critic of Rajan within the current establishment. Ever since the Modi Sarkar took charge, ripples of dissent have found resonance behind closed doors. Unlike others, Swamy has chosen to come out and state openly what some ministers (and bureaucrats) have been whispering to the PMO and muttering under their breath. That Rajan has survived the whisper whirlpool and rumours of dissent is testimony that he has enjoyed support from the very top.
What is curious is the timing and surge of speculation— Rajan’s current term ends on September 4. In fact, in India, appointments and extensions tend to be eleventh-hour events—in some cases appointments were left to the last week. The birth of speculation is driven by a potent cocktail of personality cult and provocation, and has spurred binary conclusions about “if” and “then” about his continuance and his possible exit. It would seem outcomes are retrofitted to suit conjectured causation to deliver a cause celebre.
The cult around Rajan is unusual. Traditionally, governors tend to stay under the radar. That did not preclude success. Every governor has dealt with crisis and change. S Venkitaramanan, an incredible mind, shepherded policy through near-bankruptcy, the IMF bailout and reforms. C Rangarajan, who handled the feat of double devaluation of 1991, oversaw financial sector reforms and reined in the ideology of printed money. Bimal Jalan helped India weather the Asian Contagion and engineered a low-interest regime. Y V Reddy oversaw India’s transition from a high-cost economy to a high-growth economy. D Subbarao ensured stability as Wall Street and the global financial system collapsed.
The rage and rant against Rajan is less about what he did or did not do, and more about what he said and what he did mean or did not mean. Unlike his predecessors, and heads of other Central banks, Rajan is known to air his opinion and not just on monetary policy. The choice of phraseology has been an issue. His exposition of the relative merit of India in the global economy as the one-eyed king among the blind, his reference to Hitler to elaborate on the cohabitation of efficiency and authoritarianism, his view on Make in India are on the list of exhibits.
Supporters illustrate the importance of being Raghuram Rajan. They assert that he brought stability to currency, lowered inflation, opened up banking, and forced the cleaning up of bank balance sheets. Ergo, Rajan is indispensable. But Swamy doesn’t agree. The economist-turned-politician contends Rajan hiked interest rates in the garb of controlling inflation, which has damaged the country and is the cause of the collapse of industrial activity and unemployment. Right or wrong, there are many—economists, industrialists and ministers—who subscribe to this point of view. Whether he could have, should have done what he did not is in the realm of probability analysis and a subject for a doctoral thesis.
Objectively, Rajan has done a competent job as governor. His exposure and understanding of the complexities of the global economy and his brand equity as an international economist helped. Obviously, it was no one-man show.
The turnaround of the economy was driven by crisis and fear. An inescapable fact is that much of this has been in collaboration with the government—from the bludgeoning of profligacy by P Chidambaram in 2013 and the enabling of fiscal consolidation by the Modi Sarkar. And the opening up of banks was on the anvil since Pranab Mukherjee’s budget of 2011.
Away from the heat and dust of politics, academics observe that the clean-up of banks was inevitable—gross NPAs shot up from `1.8 lakh crore in 2013 to over `3.6 lakh crore. Further, while the transparency brought about is welcome, resolution to what is a complex political economy issue is not yet visible. Addressing the consequence is not the same as addressing the cause. Critics within the academia point out that Rajan, who authored “A 100 Small Steps” report in 2008, has been rigid on many long-term reforms—on the composition of the monetary policy committee and on the institutional framework for the omnibus financial sector law. It is a moot point as to how many of the “100 steps” have been walked.
The worrisome fact is that the speculation and debate about the extension to an individual at an institution reflects idolatry tendencies. It is true that the quality of leadership does matter, the individual does matter, but the derailment of reason and adoption of rhetoric pervert the approach to governance. Individualisation of what is institutional is a fail-safe recipe for institutional failure.
At a political level, it is the prerogative of the Modi Sarkar to choose who it deems fit to lead an institution. It will depend on many factors—how the monsoon plays out will be one, what happens in the
global economy will be another, and a reset of political equations will be paramount. Eventually, whether Rajan gets the extension or does not will depend on whether the Sarkar has a Plan B. And indeed who is on Plan B.
Meanwhile, Rajan could revisit Kipling’s If, which he quoted on assuming charge. “If you can wait and not be tired by waiting, Or being lied about, don’t deal in lies, Or being hated don’t give way to hating, And yet don’t look too good, nor talk too wise.”
Shankkar Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change