Pointing out that the worry has led international investors to turn “anxious” on whether Rajan might be replaced by someone more pliant — and less voluble – as RBI chief, FT says, “To many international investors, the Rajan is a near-hero — the articulate, market-savvy central banker who tamed India’s inflation, restored its macroeconomic stability and is driving a banking system clean-up.”
The attack comes, notes the daily, when Rajan’s first term ends in September. Swamy, 77, has accused the RBI governor of a “wilful and apparently deliberate attempt… to wreck the Indian economy”. In his letter to Modi, the Harvard-educated economist, complained that Rajan is “mentally not fully Indian” because he has a green card permitting him to live and work in the US.
Suggesting that ever since Swamy’s attack, uncertainty rooms large over Rajan, the FT says, “So far neither Modi nor his administration has given any hint of their leanings, with officials saying the RBI leadership will be announced in August.”
FT quotes Rajeev Malik, senior economist at CLSA, one of Asia's leading equity brokers and investment groups as saying, “It does give palpitations to investors,” insisting, “Rajan stands out as the single most potent policymaker, who has enthused foreign investors in terms of macro-stability and encouraged their confidence in Indian policymaking.” He adds, Rajan would “leave very big shoes to fill.”
FT also quotes Surjit Bhalla of the New York-based economics consultancy Observatory Group as saying that Rajan “has been able to break the back of inflation, for which he should be given full credit. It was a superb appointment and it remains a superb appointment. I don’t think they can do much better.”
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| As seen by "Financial Times" |
FT comments, Rajan, a former chief economist of the International Monetary Fund and University of Chicago business school professor, “took the reins of the RBI in September 2013, when the rupee was plummeting and inflation was at double-digit levels.”
It adds, “Since then he has waged a determined battle against India’s spiralling prices, persuading New Delhi to adopt a formal inflation-targeting framework for its once ad hoc monetary policy. Inflation, nearly 11 per cent in 2013, fell to 5.8 per cent last year.”
However, the daily says, “The straight-talking Rajan — who presciently warned of impending trouble before the 2008 global finance crisis — has ruffled feathers in New Delhi.” Thus, last year he “called for tolerance of diverse opinions, arguing that India’s prosperity depended on its intellectual freedom.”
The daily says, Rajan’s words “were interpreted as thinly veiled criticism of BJP hardliners, who have been accused of fostering intolerance of minorities and demanding universal adherence to Hindu orthodoxy.”
Similarly, Rajan “raised hackles in New Delhi again more recently while in Washington for the International Monetary Fund and World Bank spring meetings. Asked by a reporter about India’s reputation as a ‘bright spot’ in the gloomy global economy, he cited the proverb, ‘in the land of the blind, the one-eyed man is king’.”
“His words upset India’s image-sensitive administration and were criticised by several economic ministers. But Rajan refused to apologise — except to the blind — and clarified that he was not denigrating’ India”, the FT says.
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