RBI Governor Raghuram Rajan was characteristically frank and forthright as he presented the last monetary policy under his watch. He was in a way a unique central banker and therefore, comparative assessments may not be effective. He avowed that he was sticking to his brief, while the ruling dispensation and India Inc found him to be too stubborn and unyielding. Opinion is divided on whether he did the right thing by sticking to his guns on reining in inflation. But, he should be credited with initiating key banking reforms and institutionalisation of monetary policy.
Prime Minister Narendra Modi and his party, the BJP, were under tremendous pressure to fulfil their electoral promises of swift growth at a time when the economy was becoming stagnant. They would have wanted the RBI Governor to play ball by cutting interest rates. Like the government, the corporates too were unhappy with Rajan’s rigid righteousness, which they thought was unmindful of ground realities and larger economic interests. When it comes to the RBI-government relationship, it appeared that the RBI Governor’s global reputation did bring in certain credibility, but it also complicated the relationship. Despite the regime change and he being a UPA appointee, the NDA allowed him to continue. But each time he resisted the government’s overtures, it affected the level of mutual trust. Nonetheless, the government respected the RBI Governor’s autonomy and avoided an ugly cold war, despite pressure to turn up the heat.
Rajan’s exit could certainly have been scripted in a different way as he himself indicated his desire to continue and guide the economy forward. He is the first RBI Governor in almost 25 years to be at the helm for less than five years. To his credit, he did tame inflation, helped raise foreign exchange reserves, provided stability to the rupee and forced banks to look at their staggering NPAs. History will judge if he was right.