Since Raghuram Rajan, the current RBI governor, has made public his decision to not to seek for a second term after the completion of his term on 4th September 2016, there is a frenzy in social media which refuses to die down even after almost 24 hours. Some have gone to the extent of saying that the Modi government has pushed the Indian economy to doom by letting this happen. The supporter group wants to paint him as a super hero governor which never existed before. Such sycophancy, I am sure must not only be embarrassing for Rajan himself but also a blatant insult to his predecessors.
Without going too back in the past, if we look through just three governors before him; Bimal Jalan, YV Reddy and D Subbarao, they have been phenomenal in their role at the helm of the central bank. Reserve Bank of India governors have always been exemplary people with really high level of intellect and integrity. Jalan in his tenure from 1997 – 2003, brought up a lot of changes both on policy front and inside administration. He was in the role through the Asian crisis of 1998 and the dollar flood of 2002, and did extremely well in keeping India stable through both. Y V Reddy & D Subbarao came after him, who had to face the unprecedented turbulence of 2008 financial crisis and the aftermath of it, respectively. Both did a very good job of steering India through it. In face of such people, hailing Raghuram Rajan as the singular hero of Indian economy is gross injustice to all of them. On the other hand, saying that the central bank of India and Indian economy itself is doomed because of Raghuram Rajan stepping down is heavy underestimation of the talent pool the nation has. It is an attempt of belittling every potential candidate for the role.
Having said that, he also not the incompetent American stooge Subramanian Swamy wants to paint him as. Raghuram Rajan, as he stepped in to the role, did an exemplary job in tackling the currency crisis of 2013 and has a stellar reputation as an economist internationally. His reputation is said to be critical for the investment which has come to India in past few years. The flamboyant governor has also given a very new & dynamic feel to the role itself by his open communication with the market and on diverse topic which ultimately relates to growth of the economy.
His criticism mostly is drawn on the premise that he has been very academic and non-committal in his approach. He was said not to have a very strong grip on complex commercial banking structure of India, which showed in his management of bad loan menace. Over 18 months he played with three policies to curb it, all three: 5/25, Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Asset (S4A) had limited applicability, in fact it is safe to say that SDR sort of fell flat. His guidelines on cleaning the books of the bank also led to almost a halt in the banking system with very few of them open to lend. Though he cut the rates by about 150 basis point it reflected in to an only about 40 basis point cut in commercial lending rates owing to his non-committal trajectorial statement on the future of cuts.
Weighing all his work, Raghuram Rajan has been just as good at his office as many who preceded him. So, the discussion comes down to dissent with the current government. Economy of the country is not subject matter of ideological academic exercise. The governor and the finance minister work hand in hand for a stable economy, and for a successful outcome, both need to be on the same page. There is no room for dissent to exist in executive – if there is disagreement one has to convince the other and move forward, otherwise it is a hard roadblock. If they fail to come to an agreement, one has to give in or move on. Rajan’s term gets over and he moves on, in the hindsight if this turns out to be a wrong call on the account of the government, the government will also be forced to move on when it term comes to an end in 2019.
A good signal I pick here is the involvement of people that has gone exceptionally high with the current government. I do not remember a time before, when people at large took so much interest in the appointments of the central offices, agencies and universities. If nothing else, I am certain this government will leave us with a highly active and engaged voter base.
The current government has moved away from the earlier practice of choosing RBI governor by sole choice of Prime Minister and Finance Minister. It had asked the Financial Sector Regulatory Appointment Search Committee (FSRASC) to draw up a list of potential replacement for Raghuram Rajan. The committee has apparently given seven real fine names to the government; Urjit Patel. Arundhati Bhatacharya, Rakesh Mohan, Subir Gokarn, Ashok Lehri, Ashok Chawla and Vijay Kelkar. So, it’s about time we let Raghuram Rajan be.
If my choice counts for anything, I am strongly rooting for Arundhati Bhattacharya.