Who’s Batting For Raghu And Who’s Not
- Narendra Modi
PM has not openly spoken about Rajan, but after the initial cold vibes, signals suggest a certain comfort level with the top banker
- Arun Jaitley
Has sparred with Rajan on interest rates, and talks of a “mature relationship” but repeated speculation about Rajan’s future indicates discord
- BJP-RSS
Sections do not like Rajan’s political statements, but there is clarity that perception management about the economy rests with Rajan—not Jaitley
- Subramanian Swamy
Has made no bones about wanting Jaitley’s job, and is leading an RSS drive to remove Rajan on the grounds that he has stymied economic growth.
- India Inc
Big guns like Adi Godrej and Uday Kotak have come out in support of Rajan, an indication of his global heft, but it’s no secret over-leveraged firms have been unhappy with his policies.
- Public opinion
90 per cent of top 43 CEOs polled by Economic Times want Rajan to get a second term. A change.org petition has got over 50,000 signatures in his support.
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A little after midnight in Bangalore a few days ago, something magical happened to Rajesh Palaria. The 33-year-old business analyst was surfing the news, dominated by BJP MP Subramanian Swamy’s letter to Prime Minister Narendra Modi, seeking the removal of Reserve Bank of India (RBI) governor Raghuram Rajan. A curious Palaria decided to research Rajan’s credentials. “The more I read about Rajan, I realised that he had only helped the economy flourish,” he told Outlook. A few hours later, Palaria decided to act. He took to the most accessible platform—change.org—to file a petition that has since gone viral, with 50,000 or so signatures.
Palaria says this is the first petition he has floated—and he did it to express an individual opinion and not to forward a political ideology of any kind. “I feel Rajan is a very apolitical man. He has never shown any favouritism to a political party. Dragging a person like that into a political controversy entirely run by a populist agenda is completely wrong,” he says. Palaria has been receiving threats on Facebook and Twitter, and feels that the kind of fanaticism engulfing the country right now makes it easier for him to be targeted by bullies. The incident with Rajan, according to him, is simply a reflection of what is happening in the rest of the country.
RBI governors may lord over all those boring bankers (there are notable exceptions, of course, in these scary post-2008 times) and live in a palatial house in south Mumbai, but barring their obligatory signature on rupee notes, no one really gives them much importance. Sure, the business press goes into paroxysms whenever there’s a regular monetary policy statement but, by and large, they have been below-the-radar suits. In contrast, relatively young at 53, Rajan has been the talk of town for over two years now. He is seen as the global face of the Indian economy.
After Swamy’s attack, bankers and doyens of India Inc have taken pains to endorse Rajan. But Palaria makes it special, for it shows that many young people feel Rajan (who completes a three-year term in September and is due for a two-year extension) stands for something, and represents the best of the Indian economy.
What makes this a contest is that Swamy seems to have the backing of some powers. “Somewhere—I won’t say where—I got an indication that if you want to stop him, this is the time,” he told Bloomberg. His basic argument against Rajan (and this is a school of thought backed by some economists) is that by solely targeting inflation, Rajan has strangled the growth of the economy. Higher interest rates have hurt the corporate world, fuelling and accentuating high debts.
Jaitley with Rajan
Many theories are floating on the genesis of the present discourse on Rajan, some triggered in part by the RBI governor’s penchant for speaking up on issues like tolerance and the desirability of allowing space for divergent views. These are issues RBI heads—in fact even central bank governors globally—tend to stay clear of, leaving them to political and civil society leaders. But independent observers agree that, while unusual, Rajan has done no wrong by putting forth his views on issues that affect the country, polity and society at large. The other tack—that mentally Rajan is not “fully Indian”, as he holds a Green Card—has cut no ice.
The RBI has not commented on the flurry of headlines coming out daily. A couple of top managers Outlook spoke to did convey that the senior management of the bank was “completely behind Rajan” and how this was as an “unfortunate political attack”. The RBI is by nature an apolitical body, as it ought to be. Earlier governors—even recent ones like D. Subbarao and Y.V. Reddy—were part of the government before heading RBI. But they too grew into the job, and were regarded as independent—as central bankers generally are.
What is muddying the waters is the fact that the government has refused to comment, putting off to August the decision on Rajan’s extension. While this is how governments are known to react and operate, the absence of a clear signal is not helping matters. It is known that Union finance minister Arun Jaitley—under some amount of pressure for his handling of the crucial finance portfolio—has had an edgy relationship with Rajan. Finance ministers and central bankers are not expected to see eye-to-eye, but clearly all is not well behind this “mature professional relationship” that Jaitley and Rajan share. His relationship with the government is also tempered by his public statements—even on the economy. Recently, Rajan had reacted to the description of India as the “one bright spot” in the world economy by invoking the saying that in the land of the blind, the one-eyed man is king and that this was no time to feel smug since we seemed to be doing well only because other countries were faring badly. It evoked a strong response from Union MoS for commerce Nirmala Sitharaman, who said that if he’d used better words, his message would have gone down better. She also followed up with the Swamy line of attack: high interest rates were binding India down.
Even before coming to power, the NDA government seemed less than keen on having Rajan stay on as RBI governor. Rumour mills were churning as early as April 2014, almost a month before Modi took over as prime minister. And although then BJP treasurer Piyush Goyal said that Rajan’s job was under no threat under the new government, news reports and industry gossip ensured that Rajan was constrained to issue a statement that the government was welcome to fire him. Since then, Jaitley and Rajan locked horns on several occasions over interest rate cuts, but despite the governments push to cut rates, Rajan held them.
The air was so fractious that a day before the February 2015 Budget, columnist Swapan Dasgupta, who is close to Jaitley and currently a Rajya Sabha member, tweeted: “How will RBI react? Politically or professionally? #Budget2015”. Remember, Jaitley was moved enough to react to Rajan’s criticism of ‘Make in India’ a few months earlier. The FM said it wasn’t relevant whether ‘Make in India’ was made for consumers within India or outside. The governor’s reputation for saying like it is hasn’t yet been digested by the Modi government. As a senior economist and head of a leading think tank put it, “In these times of 19th century servitude, Rajan sounds outspoken. He has been a proper, professional governor and has never said anything negative about India. He is where this country has to go not where the IAS lobby wanted it to go.”
Indeed, the relationship between the BJP and Rajan had a rocky beginning ever since the latter took office as governor. The report published by a panel headed by him recommending a new index of development ranked Gujarat as one of the “lesser developed” states in the country. Modi, whose main agenda for election ran on the “Gujarat development model”, was clearly upset by the findings.
