Skip to main content

Chicago University backs RBI governor, says Rajan fought crony capitalism, bad debt, hence under attack

By Our Representative
The University of Chicago, from where Reserve Bank of India (RBI) governor Raghuram Rajan has been on leave for three years, has warned through a blog that the decision of the “highly regarded central banker” to leave his job in September this year following “attack by politicians” is likely to “reverberate throughout India’s political system and financial sector”.
Pointing out that Rajan will return to his position as professor at the University of Chicago, the blog, sponsored by the Stigler Center at the University of Chicago Booth School of Business, credits him managing for managing “nearly halve the inflation rate and restore stability to the Indian economy.”
The warning follows a two strongly worded articles on the blog site, promarket.org, by the university’s top experts Luigi Zingales and Guy Rolnik.
Zingales, in his blog titled “RBI Governor Rajan’s Fight Against Crony Capitalism”, says, “In any country in the world, a central banker who has managed to reduce inflation from 11 percent to 5 percent while simultaneously enabling an increase in growth from 5 percent to 8 percent in just three years would have a guaranteed reconfirmation. Not in India.”
Pointing out that the “Governor of India’s Central Bank, Raghuram Rajan, much admired by the international press, is under heavy attack in his country”, Zingales says, “The charges against him are absurd”, referring to Subramaniam Swamy’s phrase that Rajan is ‘mentally not fully Indian’.
Zingales says, Rajan has fought “not only inflation, but also the inefficiency of the banking system, burdened by bad loans”, pointing out how the the Indian banking system is “mainly in public hands and was used to finance crony capitalism, which has held the country back for too many years.”
“As Governor, Rajan has rightly decided to force the banks to cut down exposure to their most dubious borrowers, even at the cost of bringing out non-performing loans”, says Zingales, adding, “With the country growing at 8 percent, these losses can be easily absorbed by the banking system.”
“Though it was the right thing, this policy has produced collateral damage: banks’ share prices were affected, and even more affected were those Indian oligarchs who had enjoyed easy credit”, Zingales says, adding, “They are the ones fueling dissent, because Rajan has dared to publicly criticize the behavior of some of them.”
By way of an example, Zingales says, “In January, while at Davos, Rajan reprimanded Vijay Mallya, owner of the corrupt Kingfisher airline, who had sumptuously celebrated his 60th birthday despite his debt of 922 million euros to 17 banks.”
In a separate article titled “The Attacks on RBI Governor Raghuram Rajan: Lessons from Stanley Fischer as a Central Banker”, the other senior expert Guy Rolnik compares Rajan with Fischer, Israel’s former governor of the Bank of Israel, saying, “Fischer found himself under attack from some of the most powerful political players in Israel, including the local media.”
Fischer, says Rolnik, was under attack because he exposed how one percent of the businesses receive an inordinate amount of the loans in Israel, which meant that a lot of other businesses that could have been successful didn’t receive loans.
Fischer won in the battle seven years ago, says Rolnik, reducing the exposure to large loans given to a few powerful business groups, leading to the introduction of reforms, ultimately reducing “these groups’ political power”, adding, the cleanup tried by Rajan reminds one of what Fischer did in Israel.
Rajan “has been under attack in the last few months” in the same way as Fischer from “politician and economist Subramanian Swamy”, says Rolnik, adding, Rajan has tried to deal “with crony banking in India” almost on similar lines.

Comments

TRENDING

Did Modi promote Dholavira, a UNESCO site now, as Gujarat CM? Facts don't tally

By Rajiv Shah  As would generally happen, Prime Minister Narendra Modi’s tweet – that not only was he “absolutely delighted” with the news of UNESCO tag to Dholavira, but he “ first visited ” the site during his “student days and was mesmerised by the place” – is being doubted by his detractors. None of the two tweets, strangely, even recalls once that it’s a Harappan site in Gujarat.

How real is Mamata challenge to Modi? Preparing for 2024 'khela hobey' moment

By Prof Ujjwal K Chowdhury*  Third time elected West Bengal Chief Minister, Mamata Banerjee is on a whirlwind tour of Delhi, meeting everyone who matters within and beyond the government, the Prime Minister, the President, some Cabinet ministers, Sonia and Rahul Gandhi, several other opposition leaders, et al.

Labelling a Jesuit a Marxist? It's like saying if you use a plane, you become American

Jesuits: Cedric Prakash, Stan Swamy By Fr Cedric Prakash SJ* A thirteen- fourteen-year-old has many dreams! That's an impressionable age; at the cusp of finishing school. It is also a time when one tastes a different kind of freedom: to go for camps with boys of your own age (not with ones family). Such camps and outings were always enjoyed to the hilt. The ones, however, which still remain etched in my memory are the mission camps to the Jesuit missions in Maharashtra and Gujarat.

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Giant conglomerates 'favoured': Whither tribal rights for jal-jungle-jameen?

Prafull Samantara By Mohammad Irshad Ansari*  The struggle for “Jal, Jungle and Jameen” has been a long-drawn battle for the tribal communities of India. This tussle was once again in the limelight with the proposed diamond mining in the Buxwaha forest of Chhatarpur (Madhya Pradesh). The only difference in this movement was the massive social media support it gained, which actually seems to tilt the scale for the tribal people in a long time.

UP arrest of 'terrorists': Diverting attention from Covid goof-up, Ram temple land scam?

By Advocate Mohammad Shoaib, Sandeep Pandey* That corruption is rampant in police department is a common experience. However, there is another form of corruption which devastates lives of individuals and their families. It has now emerged as a common phenomenon that police more often than not register false cases because of which individuals have to spend number of years in jail.

If not Modi, then who? Why? I (an ordinary citizen) am there! Main hoon naa!

By Mansee Bal Bhargava*  The number of women ministers is doubled in early July from the first term after cabinet reshuffle by the present government led by Narendra Modi. While there were 06 women ministers in the previous term, this term there are 11. The previous two governments led by Dr Manmohan Singh had 10 women ministers in each tenure. Are these number of women ministers something to rejoice in the near 75 years of independence? Yes maybe, if we think that things are slowly improving in the patriarchal system. This change is less likely to achieve gender balance in the parliament otherwise we require more than 11 as per the 33% reservation . This change is also less likely because the men politicians’ inability to handle the country’s mess is becoming more and more evident and especially during the corona crisis. Seems, the addition of more women ministers may be a result of the recent assembly elections where women played a decisive role in the election results. For example

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Effluent discharge into deep sea? Modi told to 'reconsider' Rs 2275 crore Gujarat project

Counterview Desk  In a letter to Prime Minister Narendra Modi, well-known Gujarat-based environmentalist, Mahesh Pandya of the Paryavaran Mitra, has protested against the manner in with the Gujarat government is continuing with its deep sea effluent disposal project despite environmental concerns.

Gujarat govt gender insensitive? Cyclone package for fisherfolk 'ignores' poor women

By Our Representative A memorandum submitted to the Gujarat government by various fisherfolk associations of the Saurashtra region of Gujarat under the leadership of Ahmedabad NGO Centre for Social Justice's senior activist Arvind Khuman, who is based in Amreli, has suggested that the relief package offered to the fishermen affected by the Tauktae cyclone is not only inadequate, it is also gender insensitive.