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Wednesday, October 5, 2022

Thanks, but no thanks, Mr. Rajan

In his interview to NDTV Raghuram Rajan expressed his wish to come back and help the economy recover from the Covid-19 crisis.

Rajan is somewhat of an international rock-star in the world of economics, with all the right degrees, book publications and awards. His biggest claim to fame is foreseeing the 2008 global financial crisis, when he was Chief Economist at the IMF from 2003-06.

But in order to objectively judge his offer to return from USA, where he is currently Professor of Finance at a US business school, to serve the motherland, let us cast our eye back at Rajan’s earlier stints with Government of India (GOI). From Aug 2012 – Sept 13, the Congress-led UPA govt. appointed him Chief Economic Advisor (CEA), and then appointed him Reserve Bank of India (RBI) Governor from Sept 2013 onwards, a post he held till Sept 2016. He was also chairman of the economic reforms committee set up by the first UPA government in 2007-08, and honorary economic advisor to former PM Manmohan Singh from 2008-2012.

It is a universally known fact that UPA regime was ridden with scams and this was the period when NPAs (Non-performing Assets) of banks kept rising astronomically. The NPA mess was a direct result of phone call banking under UPA when public sector banks were forced to sanction loans on the basis of calls made by influential politicians. Between 2004 and 2013 NPA figures rose by three times making it a far bigger scam than several others that can be credited to Congress led UPA.

Did Mr. Rajan, who had the ear of the PM from 2008 onwards, ever express his dissent at they way bad loans were piling up in public sector and private banks? What regulatory mechanisms, if any, did Rajan put in place as RBI Governor to check the twin balance sheet and NPA problem? Even after leaving RBI, has he acknowledged the UPA-era crony capitalism which is the root cause of the NPA mess that continues to haunt us even today?

Two major economic blunders of the UPA regime – fiscal stimulus package of 2009 in violation of revenue deficit targets, and retrospective tax amendment in 2012 – were introduced when Rajan was economic advisor to the PM. Both of these burdened an already scam ridden economy and ultimately led to its near collapse.

Mr. Rajan helmed the RBI at a time when inflation was under control and crude oil prices were at an all-time low.  Despite these favourable conditions, RBI failed to slash interest rates and kick-start the growth cycle, thereby negatively affecting small and medium scale industries the most.

Financial inclusion was languishing till the Modi Government launched the Jan Dhan Yojana in mission mode. Aadhar-enabled DBT (Direct Benefit Transfer) was another idea languishing since 2010 at least – this was institutionalized within the first Modi term itself. Has Raghuram Rajan ever acknowledged these massive achievements? No, on the contrary he has given back-handed, condescending remarks like ‘Indian economy is like one-eyed king in the land of the blind’ while still RBI Governor.

As RBI Governor, Raghuram Rajan thought it fit to go beyond the ambit of his role and support the Opposition’s nakedly political narratives like ‘Rising Intolerance’ and ‘Beef lynching’. He often went out of the way to contradict or needle the Modi Government, even trying to pour cold water on flagship schemes like ‘Make in India’ at their inception.

In Feb 2015, he felt the need to talk about ‘Hitler and how strong governments can lead a country to ruin, dispensing with elections’.  Here is a list of some bizarre and uncalled for remarks made by Raghuram Rajan while he occupied the august office of RBI Governor.

Ajay Bodke, CEO at Prabhudas Lilladher, perfectly describes these interventions by Rajan –

“He actively sought to create a flutter through these well-thought-out non-monetary, non-fiscal interventions to further his appeal among the liberal establishment, especially on the banks of the Potomac & the Thames. This stood in stark contrast with the exemplary restraint shown by professional central bankers, when holding office on non-monetary, non-fiscal issues in mature democracies like the US, UK, the EU and Japan that he never tires of holding up as beacons of all-that-is-good.”

Rajan has made no bones about his political leanings after leaving RBI. He was one of the advisors for the Congress manifesto for the 2019 Lok Sabha polls. There was chatter in the Lutyens’ ecosystem about him being a potential Finance Minister in a UPA-3 or third-front government. Rajan had also signalled his intent by saying in March 2019 that he was ‘Willing to return to India if there’s an opportunity to be of use.’

Given his closeness to the Congress ecosystem, it is fair to look back upon some of the murky going-ons in Lutyens’ Delhi during the time Rajan was RBI Governor. There are allegation he tried to save scam-embroiled  Congress leader P Chidambaram. Dr. Subramaniam Swamy has exposed how Rajan tried to silence the ED (Enforcement Directorate) probe in the Aircel-Maxis case in order to help P Chidambaram and his son Karti.

Rajan is in favour of Islamic banking. An RBI committee under his guidance had sought Islamic banking because ‘interest free banking is prohibited by certain faiths’. This proposal was later scuttled by the central bank.

With all this baggage, and given his underwhelming performance as policy-maker and central banker, it is a little presumptuous of Mr. Rajan to now declare in an interview with a controversial, Hindu-bashing media house like NDTV which itself stands accused of tax evasion and money laundering, that he is willing to come back to India if asked to help during the Covid-19 crisis.

It frankly reeks of the same entitlement he displayed while contemptuously dismissing a journalists’ question by saying “My name is Raghuram Rajan and I do what I do.”

Thanks, but no thanks, Mr. Rajan. We have other more qualified candidates like Arvind Panagariya to call upon who can work in a far more collaborative fashion with Government and other stakeholders to pull Bharat out of the Covid-19 economic crisis.

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