Raghuram Rajan ko gussa kyu aata hai (with apologies to Pinto)?
Rajan stands in stark contrast with exemplary restraint shown by professional central bankers.
A niggling detestation for the dispensation that denied him a second-term as RBI Governor is clearly evident in former UPA government’s Chief Economic Adviser (CEA) and the principal Opposition Party’s pre-2019 election economic adviser Dr Raghuram Rajan’s continuing tirade.
Dr Rajan surely did excellent work as RBI Governor, but then he also routinely and purposely transgressed ''the Lakshman Rekha'' while holding that hallowed position to amplify the fissures in Indian society and indulged in scaremongering, knowing perfectly well that a newly-elected government would refrain from engaging in an open duel with the august financial regulator.
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.
Dr Rajan’s charge of strong centralised decision-making against Modi’s PMO stands hollow when seen in the context of an emasculated PMO in the previous government that was wholly in thrall of an unelected National Advisory Council.
One of the principal reasons for the economic slowdown is the Twin Balance Sheet problem facing the Indian economy and financial system, the genesis of which lay not with the Modi government but the crony capitalism practised previously that left a toxic legacy of Rs 9.4 lakh crore ($134.3 billion) dodgy loans, effectively bankrupting most of the PSU banks, power financing companies and some corporate-focused private banks.
As India’s Chief Economic Adviser during a part of those ‘halcyon’ years, he ought to be taking some responsibility for allowing this plunder rather than pontificating later. Despite severe fiscal pressures, the Modi government needs to be lauded for trying to resuscitate the vital nervous system of the Indian economic engine i.e. PSU banks, by infusing nearly Rs 3 lakh crore ($42.9 billion) as fresh equity capital between FY2014-15 and FY2019-20.
To its credit, the government has not shied away from rolling out many politically tough but economically necessary historical structural reforms like the GST, IBC, RERA and DBT, which promise to transform India’s ossified economic architecture. These structural reforms, though disruptive in the short run, are bound to create a solid foundation for strong and sustainable growth in the medium term. Many of these revolutionary reforms have struck at the heart of entrenched interests that were allowed to proliferate and plunder government finances over the past seven decades.
These entrenched interests have waged a fierce war and fighting every inch of the way to cling on to their spoils.
Rome was not built in a day! So, why should it be any different for a continental-sized complex country with one-sixth of humanity in entrenched poverty for seven decades?
A confluence of global and domestic headwinds are being addressed by the government and regulatory authorities, not by sniping at each other and scoring a point, but through a pragmatic, single-minded focus on reviving growth in an increasingly fractious global trade environment marked by rise in protectionism.
This 'Sapta Sindhu' of bountiful monsoons, benign global crude oil prices, continuation of aggressive monetary easing along with the steps being pursued to shore up revenues by plugging the rampant evasion of GST, aggressive embracing of privatisation and raising of resources by monetising non-core assets, reviving animal spirits by slashing corporate tax rates and positioning India as an attractive destination for new manufacturing facilities and pump-priming the economy by continuing its large investments in infrastructure sectors like roads, railways, power transmission will have a significant economic multiplier impact over the medium-term and impart the necessary push to revive economic growth.
(Ajay Bodke is CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher. Views are his own)