As Rajan departs, is India the loser

Time will tell if India is the loser with Raghuram Rajan’s decision to return to the world of academia after his term as RBI governor ends in September. It will also reveal if India is still the most attractive investment destination among emerging markets. But the events that led to Dr Rajan’s decision is a definite blot on the Narendra Modi government. The way it turned a deaf ear to the manner one of its MPs tried to denigrate Dr Rajan makes it equally culpable. To question Dr Rajan’s nationalism over his US “green card” was despicable, to say the least. The statistics on Indians with green cards and those in queue is telling: 85 per cent of 234,000 people waiting for this US document are Indians. In the past decade, 279,000 Indians sought green cards. Does it make all of them anti-national, suspect or having hearts that don’t beat for India The number of Indians who already have green cards runs into several thousands, with some top industrialists not only possessing these cards but also making sure their children are born in the US so that they automatically become US citizens. The entire thing smacks of irrationality, specially in the context of Dr Rajan’s contribution to stabilising the economy and the rupee. Dr Rajan gave a very dignified response when he said earlier his nationalism was seen in his love for his work — he used the word “karmayogi”.

There is some reason to suspect that those affected by Dr Rajan’s relentless efforts to clean up the banks are behind his exit. As Prime Minister Modi said in another context about those opposing him, he had deprived them of their “sweets”, and hence the protests. Dr Rajan could well say the same. Those deprived of using the banks as their personal fiefdoms, whether as customers or within bank management, had been deprived of their “sweets” due to the reforms he had initiated within the banking system. Also, the appointment of a Bank Board Bureau with top professionals to assist in cleaning up the balance sheets of banks made life even more difficult for all those used to milking the system.

While it’s perfectly true that no individual is indispensable in any system, Dr Rajan’s contribution was commendable. He saw the nation through one of the gravest global crises, brought stability to the rupee, ushered in bank reforms, promoted payments banks and mobile banking, to name just a few things. As any economist or anyone who knows how a government is run is aware, monetary policy alone can’t cure all the ills of an economy. There must be efficient fiscal decisions too, and both should work in tandem if the economy has to grow.