Raghuram Rajan's second term is a test of Modi's credibility
The unseemly controversy created entirely by the ruling establishment and troll-in-chief and Rajya Sabha MP, Subramanium Swamy, over RBI Governor Raguram Rajan's second term proves that the Modi government does not believe "fully and mentally" in any kind of institutional integrity.
Come September if Rajan goes, the loss will be entirely India's as he is widely reckoned to be one of the best central governors in the world (a rare species very hard to find).
Going by the Modi government's proclivity to appoint ideological cartoons to important jobs such as Gajendra Chauhan, an adult film actor, as the Film and Television Institute of India chairman and Pehlaj Nihalani, the ludicrous filmmaker who created the ode to Modi, "Modi kaka", as censor board chief, a stooge as RBI governor is a frightening prospect.
Contrary to belief, the attack on Rajan, who has maintained a circumspect silence, is not just coming from loose cannon Swamy and his band of Twitter trolls, but also some senior ministers in the government who seem to be sore with Rajan and his forthrightness.
Murmurs became apparent when recently a powerful Union minister made some uncomplimentary comments on Rajan at a private gathering.
After Rajan's much discussed "India is a one-eyed king in a world of the blind" comment, he faced an avalanche of ministerial criticism such as that from MoS Commerce Nirmala Sitharman. For those uninitiated in economic debate and discussion and used to the Sangh's monolithic view, Rajan is a puzzling commodity.
What the NDA government fails to realise is how much comfort an independent and competent RBI provides to the India story globally. Investors rely upon Rajan who is perceived to make the right moves such as ensuring inflation is under control, managing foreign exchange and other external risks, devaluing the rupee gradually and thereby protecting the economy from both internal and external shock.
Ever since the NDA came to power, it has been chipping away at the RBI's institutional independence even to set rates with a committee headed by the finance secretary, and not the RBI governor.
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| Raghuram Rajan is widely respected across the global economic corridors. Can India afford to lose him? |
Former prime minister Manhohan Singh respected the RBI's independence despite knowing a little more economics than the current dispensation, because of the message that respect sent out in the world.
Even P Chidambaram, despite having many differences with RBI governors during his tenure, did not attack the office, confining himself to saying that "he would walk alone to grow the economy".
Modi's recent comment that Rajan's reappointment is an "administrative matter which should be of no interest to the media" is perplexing. Swamy immediately latched on to it as support for him.
Rajan's second term has now become a test of Modi's credibility to maintain the RBI's economic independence all over the world. The personal attacks made by his leading lights reflect pretty badly on him.
After all, Rajan commands worldwide respect and this is the first ever instance when the establishment has unleashed a slander campaign against an RBI governor who does not have a right of reply.
Previous RBI governors have allowed the banks to get away with underreporting and under-providing of bad debts. A policy of ever greening, that is rolling forward bad debts in the guise of restructuring. This has only resulted in a game of passing the parcel and the problem has become a gargantuan package.
The RBI under Rajan has called the bluff by asking for transparency and asking the banks to make provisions for bad debts, thereby acquiring extremely powerful enemies as many big business groups want debts to be swept under the carpet.
A campaign of calumny has been unleashed by the "big debtors" to ensure business as usual. A top equity analyst said "it's like a supari has been issued on Dalal Street against Rajan".
Attacks have already started appearing in small time alleged news portals as the mainstream media is averse to targeting an effective RBI governor. Lobbyists of big business houses are out in force flashing copies of Rajan's green card and planting wild stories.
Rajan carries an Indian passport and friends say that he is hurt by the "personal venom" he has been facing and the deafening silence from the government.
Despite Swamy's claim of support that his "Oust Rajan" campaign has Modi's nod, the prime minister has maintained a studied silence.
India has become used to silence from the PM when it comes to critical and fundamental issues. But how long will Rajan stomach the daily insults? He is not a politician with a thick skin and is already being spoken of as a future chief of IMF.
Obviously, Rajan has greener pastures ahead. If Prime Minister Narendra Modi does not quickly cap this daily drivel, the Indian economy could suffer immensely.