Dr. Raghuram Rajan is, I believe, a modest man. Recently, he must have been embarrassed to be in the eye of a storm after he announced that he is not open for a second term as Governor of the Reserve Bank of India (RBI). When he assumed office, aged 50, he was so refreshingly different from earlier Governors that some in India went so far as to compare the former Chief Economist of the IMF, and Professor at the University of Chicago Booth School of Business with James Bond!
To re-capitulate, Dr Rajan was earlier the Chief Economic Advisor to the Government of India’s Ministry of Finance and was later appointed the RBI Governor by Dr Manmohan Singh’s UPA Government in 2013. Not many recall that Dr Rajan was given a tentative three year term as distinct from the conventional five year term of office given to all his predecessors. Be that as it may, many were pleasantly surprised when the Modi Government on assuming office in May 2014 chose to continue with Dr Rajan at the helm of the country’s central bank, even though it is fairly common for new Governments to appoint people of their own choice to high positions.
There were good contributions made by Dr. Rajan but there were a few incidents which caused acute embarrassment to his employers as well. Being far more outspoken than his predecessors, some of his thoughts expressed in public addresses did not go down well with the Government. His comments were perceived to be open criticism on sensitive issues, way beyond the purview of his position as RBI Governor. His remark that India was like an one eyed king in the land of the blind came after another suggesting that the country should become more tolerant even as the Government was battling an image crisis, largely fuelled by the Opposition, that it had become totally intolerant.
Some believed the Western media and financial institutions were giving greater credence to Dr Rajan’s comments. This made the Government wary fearing that Dr Rajan was communicating, even inadvertently, wrong messages which could be exploited by detractors of India, and more specifically of Prime Minister Modi. Can we forget that not too long ago, 65 Members of India’s Parliament had petitioned the Head of another country (in this case the President of the United States) not to issue a visa to Modi, a legally-elected Chief Minister of a State in the Union of India? That 64 of them lost in the 2014 elections and Modi got that US visa is another matter.
The 2014 General Elections in India gave a single party a huge mandate for the first time in decades. People expected the Government to deliver on its promises. It would need all key appointees to rise to the occasion. The Government did support Dr Rajan’s moves to hold down inflation. However, if he believed that he could be impervious to the pulls and pushes of political pressures he was being too naive.
I don’t dispute that Dr Rajan is a highly learned and competent academic and economist. No one can. I am, however, totally against those who speak as if the Indian economy will collapse with his exit. The fears spread in some quarters that a panic-stricken Modi Government hastily announced a slew of far reaching economic reforms as a reaction to Dr Rajan’s decision to leave is far-fetched.
These unprecedented reforms now permit 100 % Foreign Direct Investment (FDI ) in 10 important sectors including key ones like defence, civil aviation, and pharmaceuticals. They signal the Government’s desire to take bold steps to change the fortunes of a country which for too long was caught in a web of indecision.
I am annoyed by some people trying to spread fear that Dr Rajan’s exit (which, by the way they called “Rexit”) will spell doom for India. How can it when, compared to most of the global economies, India is poised to grow in 2017 at a much faster rate of 7.6 % as estimated by the World Bank. They would do well to realize that no man, however brilliant he might be, is indispensable to a nation of 1.3 billion people.
To put things in perspective, let’s fast forward to Feb 2018. Will the US economy collapse if the next President of the United States (be it Hillary Clinton or Donald Trump) choose not to extend the four year term of Dr Janet L. Yellen, current Chair of the Board of Governors of the Federal Reserve System? Just asking.