I am no economist. I claim no expertise in macroeconomics. But, here are 2 reasons why an economics layman like me is disgusted with the way RBI Governor Raghuram Rajan has been shown the door by the Modi government & also 2 reasons why this is ominous for India as a country and as an economy.
The Exit
(i) Every government makes political appointments to institutions, agreed. Every government wants its nominees in crucial posts, agreed. The Modi government since its inception had a problem- removing Congress appointed Governors of states was easy: shunt them to the North East and they'll resign. But, how do they sack the Congress appointed RBI Governor- a renowned and prodigious economist? They couldn't. So, instead there was constant friction between Arun Jaitley and Rajan- on interest rates, public debt management, etc. Rajan was no 'yes-man' and Arun Jaitley is no economist.
(ii) Every finance minister wants an RBI governor who agrees with his broad economic agenda and frames policies according to the economic path the government has chosen to tread, agreed. Even P Chidambaram had some problems with D Subbarao, agreed. So, then why not just openly say that 'Mr. Rajan and the government hold divergent views on how the economy should be handled and therefore we don't want to renew his tenure'. Simple. Why use foul-mouth expert Subramaniam Swamy as a puppet to spread lies and mount personal attacks on Rajan in a bid to create a false background for his exit? Disgusting. Surely the PM and FM wanted Swamy to start the shameful trajectory which would then lead to Rajan gracefully turning down a second term. Can the Modi government publicly claim that they offered Rajan a second term and that he declined?
The Future
(iii) The governor of any central bank doesn't carry the economy of the country on his shoulders, agreed. No economy is a one-man show, agreed. But, if the Modi government claims that PM Modi's face alone is a confidence-booster for investors and rating agencies around the world, can't the same be said about the face of the RBI governor? Raghuram Rajan's name and face alone had appreciated the Rupee against the US Dollar on his very first day in office in September 2013 (₹67/dollar to 65/dollar). Rajan's exit is ominous for the Indian economy- if the Indian government doesn't want 'the person who predicted the 2008 global recession' and 'the person who was the youngest ever Chief Economist at the International Monetary Fund' as the governor of its central bank, investors will think twice before investing. Whirlwind world tours by our PM will not help. Flying around the world shouting 'Make in India' is one thing and appointing the right people for that to happen is quite another.
(iv) Extremely few politicians like to be criticised, agreed. We often like to work with like-minded people, agreed. Elected leaders in our country think they should be the unquestionable authority till the next election, agreed. But, in Rajan's exit, the Modi government has lost the sole opportunity it had to quell the perception that the PM likes to surround himself and work with only sycophants. Rajan was probably the only independent voice left in the executive branch of the government; he wasn't a Modi cheerleader and his evaluation of the government was unbiased and civil- never reeking of unnecessary admiration or awe. Rajan's exit is ominous for India as a nation- this central government of ours does not respect knowledge or talent, it does not respect institutions, it does not want a single critical voice around it. This government has shown that it rewards only fierce political allegiance and sycophancy, it demands unqualified obedience from those within it and it feels it can do no wrong, ever.
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The Exit
(i) Every government makes political appointments to institutions, agreed. Every government wants its nominees in crucial posts, agreed. The Modi government since its inception had a problem- removing Congress appointed Governors of states was easy: shunt them to the North East and they'll resign. But, how do they sack the Congress appointed RBI Governor- a renowned and prodigious economist? They couldn't. So, instead there was constant friction between Arun Jaitley and Rajan- on interest rates, public debt management, etc. Rajan was no 'yes-man' and Arun Jaitley is no economist.
(ii) Every finance minister wants an RBI governor who agrees with his broad economic agenda and frames policies according to the economic path the government has chosen to tread, agreed. Even P Chidambaram had some problems with D Subbarao, agreed. So, then why not just openly say that 'Mr. Rajan and the government hold divergent views on how the economy should be handled and therefore we don't want to renew his tenure'. Simple. Why use foul-mouth expert Subramaniam Swamy as a puppet to spread lies and mount personal attacks on Rajan in a bid to create a false background for his exit? Disgusting. Surely the PM and FM wanted Swamy to start the shameful trajectory which would then lead to Rajan gracefully turning down a second term. Can the Modi government publicly claim that they offered Rajan a second term and that he declined?
The Future
(iii) The governor of any central bank doesn't carry the economy of the country on his shoulders, agreed. No economy is a one-man show, agreed. But, if the Modi government claims that PM Modi's face alone is a confidence-booster for investors and rating agencies around the world, can't the same be said about the face of the RBI governor? Raghuram Rajan's name and face alone had appreciated the Rupee against the US Dollar on his very first day in office in September 2013 (₹67/dollar to 65/dollar). Rajan's exit is ominous for the Indian economy- if the Indian government doesn't want 'the person who predicted the 2008 global recession' and 'the person who was the youngest ever Chief Economist at the International Monetary Fund' as the governor of its central bank, investors will think twice before investing. Whirlwind world tours by our PM will not help. Flying around the world shouting 'Make in India' is one thing and appointing the right people for that to happen is quite another.
(iv) Extremely few politicians like to be criticised, agreed. We often like to work with like-minded people, agreed. Elected leaders in our country think they should be the unquestionable authority till the next election, agreed. But, in Rajan's exit, the Modi government has lost the sole opportunity it had to quell the perception that the PM likes to surround himself and work with only sycophants. Rajan was probably the only independent voice left in the executive branch of the government; he wasn't a Modi cheerleader and his evaluation of the government was unbiased and civil- never reeking of unnecessary admiration or awe. Rajan's exit is ominous for India as a nation- this central government of ours does not respect knowledge or talent, it does not respect institutions, it does not want a single critical voice around it. This government has shown that it rewards only fierce political allegiance and sycophancy, it demands unqualified obedience from those within it and it feels it can do no wrong, ever.
Follow: @theworldlymonk
Like: facebook.com/theworldlymonk
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