Raghuram Rajan: Why RBI needed more of him

Akrita Reyar

Finally, Prime Minister Narendra Modi spoke up to give outgoing RBI governor Raghuram Rajan a thumbs up. The endorsement that came a wee bit too late was welcome nevertheless. Loose cannons like Subramanian Swamy needed to be told that green card holders of other countries do not make economists ready to serve India any less patriotic.

Rajan, who seemed game for another term, had sprung a surprise when he announced that he was going to return to academics after his term came to an end in September.

Rather than waiting for a task committee to decide his fate, the Guv thought it better to part with dignity than endure daily salvos. Sensibly, he thought of the weekend to announce his intent to depart, not upsetting the markets mid-week.

Normally, the transition on Mint Road fails to create a ripple especially amongst common public, but Rajan’s case was different. The high profile boss at the RBI served at a delicate cusp of time for India and the world. He assumed office when inflation was high, rupee was sliding and India was counted amongst the “fragile five”. With his astute handling of the affairs, he helped modernize India’s central bank, controlled inflation, assured investors that India was a good place to put money and made banking sector more competent with introduction of more players.

His superlative performance at such a sensitive time is a snub for those who alleged that engineers and CAs can’t be good economists. Performance, at the end, should be the sole criterion to judge and not just degrees on a CV.

The criticism that his reluctance to cut rates hampered growth can also be kicked in the teeth when figures are actually put on the table and compared with other global economies. It is not without reason that the World Bank chief has called India as bright spot in the otherwise morose world.

Obviously there were points of friction between him and the government. Both the UPA and Narendra Modi government would have preferred a rate cut to boost growth, given that inflation has been brought under check. There were also differences over bond market regulation, setting up of an independent debt management office - a proposal that Arun Jaitley later withdrew - and restructuring of RBI.

And while it is sad to see a competent man leave due to the politics of it all, Rajan must “do what he does”!

The one regret is that the RBI Guv did not get sufficient assurance from the government to complete the unfinished business of what he started. Whether it is the monetary policy framework or Rajan’s no nonsense approach towards bad debts, these remain tasks that are yet to be taken to culmination.

As for the future, one can only hope that another equally competent person will take charge and keep the economy safe.

Raghuram Rajan’s parting line of communication about being “available to serve” the country gives us hope. Probably, we will see him back in some other influential position in the North Block!