It is almost 4 days since RBI governor Dr. Rajan made his ‘back
to academia’ decision public. Much has been said and still being pondered upon.
I have read few articles and many social media expressions. And I simply lack
the ability to summarize things in nice little sentences. So I am going to be
little lengthy. I am not the guy who knows much about monetary economics or
knows behind the scenes in policy-making. So clearly there are lots of
mistakes. Please bring them to light. The purpose of this writing is majorly to
clear my own head and secondly, reduce the unwarranted heat around me if
possible.
When I first
come to know about the decision, I was saddened as if there is some loss. Then,
because of some insensitive looking FB responses and my own pondering, I
thought why I am thinking this as a loss and not as something that shouldn’t
have happened in best case scenario. I don’t have proven argument to say that
not having Dr. Rajan at helm will be a loss. And accepting one such argument will
imply that rest of the minds are somehow pretty much inferior- some sort of
brain drain argument. But I don’t tow this line. Certainly there is something
happening for first time here. As much I can say, it is happening first time
that governor completing first term is not asked to continue. But do I see foul
play or some injustice? No. what has happened in my and many people’s mind is
that media cultivated image of Dr. Rajan, of the upright, clever, almost know
all and man on mission leader, is now seen to suffer at the hand of one
heavy-handed, brutal, seemingly autocratic government.
First of
all, I don’t see any injustice or formally wrong treatment given to Dr. Rajan
by government. He was ending his term and his employer decided not to renew it.
It cannot be used against government whether he was willing to have the next
term and what is the precedent in such matters. Government conveyed him, most
likely on his enquiry or initiative that they are not interested in extending
the contract and hence Dr. Rajan declared that he will go back to academia
after end of his term. It is possible that he could have reacted in different
manner, but chose not to. That indicates set of qualities and that must be
appreciated. But government cannot be blamed for his decision. They have simply
decided not to go with the convention, but they haven’t bypassed or violated
some rule or law. If government needs to be blamed then it is to be blamed for not
providing enough cover or support to Dr. Rajan for attacks on him. Government deserted
Dr. Rajan and signalled that anyway he is unwanted or maybe he really might be
part of some corruption or an accomplice. Again, even this behaviour of government
is on that interesting boundary of being politically and techno-morally correct.
So soft hearted, ethic or pure morality lovers can blame government, but I see some
shrewd politics. Government will be eventually without a man they do not want
to be with and at the same time, Dr. Rajan, his actions and everything about
him will keep passing through social media heat and become too burnt to be
recollection-worthy in those numerous small scale opinion makers’ minds. But on
surface, it is simply the case of an employer not renewing the contract of an
employee who has brilliant credentials, who is correlated with some top performances
but not really in love with management. Fair enough in such rude times! Government
has waited for the end of his term. If they were really interested in embarrassment,
then they would have moved earlier. We can almost see their theory of action. ‘We
have come to power mainly on the promise of swift actions with or without
backing of certain ideology and rapid results. We ought to maintain that perception.
So we need personnel which will never resist the impetus of action generated
from top, whatever is their reasoning. We should do all that is possible within
the ambit of rules to get such people.’ If this is really the theory, will it
be wrong to have such desire for a government? It is a big, separate question. But
in my opinion having a pool of people to act on something is better than rounds
of deliberations where social network is the sole provider of the personnel and
outcome is despite of government.
The way people
jumped on the dismay-merry-sarcasm-come on-that’s it expression bandwagon is
eerily similar to congratulations bandwagon after ISRO launches. It was an open
tournament without qualification or elimination round. It is a true exercise of
freedom of expression which eventually turns everything pitifully boring,
proved nth time.
What is interesting
is why he was unwanted to government. But we can only speculate on possible
reason/s. I see following possibilities:
1.
The difference on the course on monetary policy
Government needs those lower interest rates
to work their magic with the economy. But government cannot announce those
interest rates. And this guy, who determines the interest rates, just doesn’t accept
anything about growth; he just fears that inflation demon. So, it is within the
terms of the contract to not to renew his contract and government does that.
2.
The difference on the course of NPA and bank
lending
This possibility is one which smells of
those behind the scenes conspiracy theories which we all love and none of us
can prove. And, being a mere spectator with internet connection and time to
read all sort of comment/commentaries, I cannot really say anything here. If this
is true then it turns into the story of crony guys getting rid of efficiency crusader.
I don’t think we will ever have jury coming in on this.
3.
The strong belief on the part of government that
governor will not see merit of government plans or proposed policies and keep
having stance which is detrimental to government objectives because of his own
reasoning which government doesn’t adopt.
In fact (3) is a broader possibility
inclusive of (1) and (2), but it includes the suspicion on his reasoning and
framework which is more serious than differences on certain specifics.
--
I would like to know the logic, the
model behind his policy making and how those policies yielded results, kind of impact
evaluation. Right now, I am not capable to examine these questions. But the
question that will take prime seat is, the question which always being debated
by monetary pundits, whether there was any sacrifice of growth and to what extent
was it justified. As much I understand, that there are not very clear-cut
answers here.
Right now, I wonder about monetary
policy from September 2016 onwards. Will interest rates come down rapidly? Will
credit be more easily available? Will NPA cease to be an issue? And, if economy
doesn’t pick up with those changes as it is being advertised and we have
inflation rising again, then how such ugly fire can be doused? It is
interesting how government, assuming they will have their guys at all desired
points, will manage economy, its own image of saviour of all kinds and cures and
re-election prospects, in remaining years of their turn if game takes some
unexpected turn.
I must express my admiration for the grand-masters, who reveal their awareness of crimes of others in public domain
and leverage it brilliantly without ever putting those fishes in the net.
So what lessons I take for myself?
1.
Central Bank Governor in India supposed to have
sense of rural hinterlands. Till now I have thought that knowledge of monetary
economics and policy making in economy like India is necessary and sufficient.
I am still figuring how one gets sense of rural hinterlands.
2.
It is extremely beneficial to have excellent
social media henchmen.
3.
The Indianness certification courses for returning/temporary
seekers NRIs who are seeking jobs that involve working with current government can
be in huge demand.
4.
10% growth rates will kick-start some divine
scheme which will just provide enough for everyone and anyone in India, well, that's bit cliched!
Dearly waiting for lower interest rates,
cheaper homes, smart city and 4 days 18 hours per week job.