'He is Raghuram Rajan, nothing more, nothing less' – Counterpoint to doomsday theories

'We must give Rajan respect, but let’s not elevate him to the pantheon of gods.'
'He is Raghuram Rajan, nothing more, nothing less' – Counterpoint to doomsday theories
'He is Raghuram Rajan, nothing more, nothing less' – Counterpoint to doomsday theories
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Since RBI governor Raghuram Rajan’s announcement that he will not me seeking another term, several commentators and observers have slammed the Modi government for not retaining him.

We speak to one of the people who believe that it was the right decision to let Rajan go. MR Venkatesh, a Chartered Accountant based in Chennai, and a popular commentator voicing concerns of the Indian right, speaks on Rajan, the hype and the reality.

Do you think it is bad for the Indian economy that Raghuram Rajan is leaving the RBI?

First I must say that Raghuram Rajan is very respected and knowledgeable, and he is one among those at the high table of economists in the world at any point in time. He shot to fame sometime in 2008 when he predicted the American crisis.

But I must add that someone like S Gurumurthy had predicted the American crisis far back as 2001. And Dattopant Thengadi predicted the downfall of USSR in 1975. Even professors like Varadarajan of Vivekananda college in Chennai have spoken about it.

But they don’t have a Harvard, Stanford or Chicago behind them. So they are not talked about in the local media. They are not fair, they are not accented, they don’t have a foreign degree, they don’t speak like him – they are not the kind Lutyens’ Delhi recognizes.

Raghuram Rajan’s recognition comes from that. He has pedigree I don’t deny, but there are several people of the same pedigree, homegrown and with the same credentials as him or more. We have had governors in the past, and will have more in the future.

YV Reddy did insulate India from the global economic meltdown in 2008, and we did not celebrate him. Subba Rao did a great job, but we did not give him the kind of credit that he deserved. We don’t recognize Bimal Jalan for his contribution.

Suddenly we have terms like ‘rockstar economists’ for foreign-bred economists like Rajan. We must give him respect, but let’s not elevate him to the pantheon of gods. He is Raghuram Rajan, nothing more, nothing less.

So he is a man of good pedigree. He has hinted that he wanted to continue. Don’t you think that the government should have done more to retain him? Would India not have benefitted from it?

Every exit has to be graceful. But let’s look at his entry, when he was appointed in 2013. He has come on a vacation to India. He has not resigned from the University in Chicago, has he? Has he resigned? And he is all set to go back to Chicago now, it is like he was on a holiday here, to put it crudely. 

If he was so sure that he is getting back to academia, that means he was only on leave. If he was only on leave, then can he truly be  "independent"?

Do you see any serious questioning for having a part-time RBI governor? Did the media ever question him? And has he applied for American green card? Would China appoint a banker with an American green card?

He is pedigreed, but these are questions and unsettled debates. He is still probably on the payroll of the University of Chicago even if he is not being paid by them. Don’t you think these questions need to be asked? It was never asked, and if this government feels that a part-timer cannot be a full-time RBI governor, then the government can decide not extend his term.

And I want to make it clear, whether it is Arvind Subramanian, Arvind Panagariya or Raghuram Rajan, the moment their term is over, they take the first business-class ticket out of India, and pontificate as to why India does not grow.

But these questions notwithstanding, do you think he has done a good job in the past three years?

I will give you some examples.

Coimbatore in Tamil Nadu has many small businesses, and the whole textile industry is not doing well, so there are huge NPAs. More than 200 mills are facing problems. There are no buyers for these assets so even bankers cannot do anything about it.

Take Tiruchy’s case. All the small businesses there are facing problems because of a flawed purchase policy of the BHEL. So they are all on losses.

Now take the case of Sivakasi. Here cracker producers are facing problems due to competition from China. There is a policy issue here, and there is an identification problem.

Now tell me what has RBI done in identifying the remedies for these issues? It is the regulator of the banks. All of them are not scoundrels, all of them are not willful defaulters. Majority of them are honest people and have gone NPA for reasons beyond their control.

In terms of identification of NPAs, he has been late. In terms of providing solutions, he has been well behind the curve. And in terms of going ahead, it is not what the country wants.

But he has been credited with controlling inflation?

There is a big difference between the market in 2013 and now. Oil prices have dropped significantly. Fiscal deficit has come down because of that. So interest rates come down, so everything has come down. We can ask, what has he done for dal prices going up? He cannot do much about it, but we don’t ask him. Then don’t credit him entirely for controlling inflation as well. We say that Modi has reaped the benefits of oil prices going down, why can’t we say Rajan also did?

Now let me tell you what the biggest problem is with Raghuram Rajan.

Corporate lending massively increased under the UPA government. But revenue did not grow enough. So corporate earnings are behind the curve, but the loans are highly leveraged. What has he done about it?

But what could he have done?

But as a regulator if you say you will only report, then even I can be a regulator. What has he done about it? Tell me one step? Has he done any deleveraging?

Not all corporates are rogues, some of them have put it in projects and they have been stuck. This is where deleveraging has been done. He cannot sit in his office and say ‘oh all of them are bad boys’. That even my grandmother can do. Anyone can criticize, but what has he done.

Don’t you think the political attack carried out on him was not warranted? Why was the national interest argument brought in by Swamy?

If you look at this way – the PM has not yielded to media pressure. He has put his foot down on his decision. At least the authority of the PM has been restored. It is not like the previous government where media touts were discussing appointments.

As for Swamy, whatever his politics, please let us not forget he is a top notch economist. So if he has an issue, why should he not raise it?

It can be raised, but why talk about national interest and doubting his intentions?

India still runs on small family-run businesses. These are the people running the economy, and asking for money. And the government wanted to give them a Mudra bank. But Rajan has opposed it. We need such banks, but he did not understand how India works. Swamy understood this problem.

Further, the licenses to the new private banks were given in contravention of the RBI guidelines. That was problematic. These are the issues Swamy pointed out.

There was no allegation of him being anti-national, he is just not national enough.

He is a smart economist, but not a smart Indian economist.

Everybody’s predicting a doomsday scenario for India, billions of dollars will flow out of the country now that Rajan is not seeking a second term. How would you react to these predictions?

If Rajan has left the Indian economy in such a fragile situation that it will be impacted just by his exit, then for the sake of India, we should let him go.  

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