As the Indian economy decides to take a leap of faith from the throes of sub-par growth to an era marked by stupendous growth, it is the rock and roll central banker that stands in the way. Or does he?
Raghuram Rajan, the awe-inspiring central banker is staring at the end of his term in September of this year with no evidence of an extension in sight. He took over the reins at the Reserve Bank of India in August of 2013 when inflation was sky high, growth prospects were well-nigh dead, the Rupee was in a tailspin and our hopes in a revival were as slim as the chances of a Donald Trump presidency. Since then, the wholesale price index has touched historic lows, the nation’s foreign exchange reserves have scaled historic highs and we have seen approval for eleven payment banks. The banking sector is churning for the better and hopes in a revival now look well founded.
It would be stupid to give credit for all this to Mr. Rajan. A lot of the credit goes to the Congress Party and Rahul Gandhi for being stupid enough to not get re-elected and for Modi to just show up on the scene.
Lately though, the Raghuram Rajan fanclub seems to be diminishing with the finance ministry being conspicuous by its absence. The BJP has unleashed its favorite bloodhound on Rajan, Mr. Subramaniam Swamy and I’m pretty sure Rajan’s not one to bite back. If all goes as per plan, Rajan might return back to the University of Chicago as a professor and Modi will get to put in another of his yes-men at the helm of the banking sector.
Mr. Rajan is not your everyday nationalist who is willing to put everything at line for the Indian economy. Yet, who is Subramaniam Swamy to put a question mark on Mr. Rajan’s nationalist credentials. One has no idea how the wheels of governance churn. It is not Mr. Rajan’s prerogative to stay here and fight the current regime tooth and nail. He should and will return to his cushy post abroad once the dust settles over his re-election. The question is, whether Modi and Jaitley want him to stay?
The stock market will show the nation that Raghuram Rajan is good news for the economy once it falls on the day a new central banker takes over. The autonomous Rajan is set to lose his job over his own opinions and refusal to fall in line with the government’s reading of what the economy needs. While disagreements are a good sign and no one wants conformity for the sake of it, but unleashing a hound like Swamy was a low blow from the government. While I derive utmost pleasure from the antics of Mr. Swamy in dealing with the Congress party, employing such tactics against a non-political technocrat who the government badly needs depict a lack of sensibility on the part of the government. It is unreasonable to think that Swamy is acting on his own motion. What has happened here is a tacit signaling from the BJP central command that Rajan is persona non grata and his handling of the economy is not in line with the government’s. To be honest, Rajan has had his job longer than Jaitley and Modi have and it was Rajan’s actions that have brought about a principal change in the banking sector and the economy at large before the Modi-Jaitley duo got a look in.
If Rajan decides to stay after the Swamy-show, it will be out of his big-heartedness. All that is possible if only the government realizes that Rajan is an integral part of India’s rise to being the next economic superpower and it is the combined efforts of a Modi-Rajan duopoly that will be required and not to forget an absolute absence of our left of centre friends, i.e. Congress, Kejriwal, Nitish, Mamata and whosoever harbors Prime Ministerial ambitions in the current political scenario.