In a nation where the PM’s image is larger than life, it’s ironical that the main argument against Rajan is that he had become bigger than his stature
The BJP-base’s arguments against Raghuram Rajan, who announced he would step down in September as Reserve Bank of India (RBI) Governor — he had wanted to stick around but consultations with the government ruled that out — are that first, no individual is greater than an institution (“and India above all”, as one Yoda-type tweeted); second, according to a reporter close to BJP president Amit Shah, the party “believes the RBI Governor should not be foreign educated and an academic of a foreign university”; third, a newspaper close to Swadeshi Jagran Manch convenor S Gurumurthy says that Rajan is no great shakes though he has not done any “severe damage” to the Indian economy; and fourth, there is plenty of talent available in India as an alternative.
True, no one is indispensable, though that was hardly the point; and true, India is brimming with talent, though it is strange that the union council of ministers remains, with exceptions, a noticeably talentless group. Various reasons are given for Rajan’s fall from grace — his characterisation of the relatively healthy Indian economy in a dismal global situation as the “one-eyed king in the world of the blind”, which commerce minister Nirmala Sitharaman publicly denounced; his weighing in on the intolerance debate; his steadfast refusal to dramatically reduce interest rates despite the government’s friends (and four ministers) repeatedly urging it — but in the end, what probably did him in was the chorus for his extension. No government likes to be told what to do, particularly one that swears by paternalism. Citing factors like global credibility, and that billions that would follow Rajan out of the country, was not helpful. Possibly his well-wishers were reacting to the unseemly attacks by Subramanian Swamy, a recent arrival in the Rajya Sabha, but they should have known that Swamy was only His Master’s Voice.
Incidentally, Swamy is also foreign-educated: PhD, Harvard University. (He was an undergraduate at Delhi University, as opposed to Rajan, who was at IIT.) That the BJP openly states its fear of foreign-educated Indians is beyond patriotism: it is downright paranoia. It is unlikely to be of comfort to the foreign-educated NRIs who throng stadiums to see ‘rockstar’ Prime Minister Narendra Modi, unless those NRIs are more like Amit Shah — anti-intellectual and distrustful of anyone with an education.
Gurumurthy’s newspaper accuses Rajan of steadfastly refusing to lower interest rates despite adequate liquidity in the system, keeping the cost of borrowing for corporates high; it also says that Rajan’s clean-up drive pushed the Indian banking system to the brink. The former is a long-running complaint which ignores how Rajan came in at a time when inflation was running amok and the rupee was in free-fall. He fixed that with a iron grip on rates — with full support from a fiscally-responsible government. Still, small and medium enterprises argue that even their cost of borrowing, cheaper than that of large corporates by five per cent, was still prohibitively high. Perhaps. Yet the other argument is equally compelling — why punish savers with low interest rates when borrowers are reckless with cheap money?
Rajan’s clean-up of entrenched corruption in the banking system, ironically, only mirrored the priority accorded by BJP governments in the Centre and in the states to rooting out corruption. To say it was pushed to the brink is meaningless if it never went over the brink. A dishonest article in the largest-selling English newspaper made it seem that Rajan punished conglomerates for their promoters’ poor judgments, when the opposite was for long true — many promoters blackmailed the banking system into providing further loans if only to service the interest on past debt. Some parliamentarians who ought to know better argued that Rajan acted too late against bad loans and crony capitalists; this is a variation of ‘whataboutery’, and intellectually weak false equivalence that is the BJP’s favourite form of argument.
In the end, the government’s first argument is most telling: that Rajan had become bigger than his stature. Again, the irony is unmistakable. Modi too has cultivated an image that he is not only larger than his party, but also larger than Parliament, larger than the Constitution, and that he is India itself. This is the nub of the matter: that in Modi’s eyes, there cannot be two rockstars in the country. To Modi it does not matter that Rajan’s credibility is largely based his jealously-guarded autonomy; and if nothing else, this reveals the deep insecurity that is at Modi’s core.
India will survive, though Rajan’s successor will needlessly have to establish his credibility with a stingy global community. As for the Governor himself, who knows; if he plays his cards right, he could even, one day, follow in the footsteps of one of his RBI predecessors, a certain Dr Manmohan Singh.
Senior journalist Aditya Sinha is a contributor to the recently published anthology House Spirit: Drinking in India. He tweets @autumnshade. Send your feedback to email@example.com
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