The choice of Urjit Patel as the next RBI governor has only made the Raghuram Rajan exit puzzle more intriguing. Not only was Patel Rajan&’s deputy in the RBI for three years, he comes closest to the outgoing governor in economic thinking and policy making. So, although there were many critical murmurs in saffron circles that Rajan&’s steadfast refusal to lower interest rates was hampering growth as was his steely determination to clear the mountain of bad loans pending with public sector banks, it would seem that the Modi government had no quarrel with his policy direction. Patel is believed to be as hard line as his boss on issues that became the burning controversies of Rajan&’s tenure.
Clearly then, the problem with Rajan was one of bad chemistry rather than faulty policy. When Subramanian Swamy first began his campaign to oust Rajan, it was said that he had been set up by powerful forces in the ruling dispensation which wanted a new RBI governor. The government&’s silence only added fuel to the fire of speculation.
Two reasons are being ascribed for Swamy&’s anti-Rajan campaign which ultimately compelled the RBI governor to put in his papers and return to the world of academia. One is his donning the mantle of a public intellectual who ended up sounding critical of the government when he spoke out on sensitive issues like the intolerance debate and the new growth figures. The last straw, it is said, was his put down to those boasting about India being the one bright spot in the global economy. He compared it to a one-eyed king in the land of the blind. Stung by his comments, the current dispensation felt that Rajan was speaking out of turn way too often. The RBI governor, it was felt, should stick to his mandate, which is to frame monetary policies, instead of talking about everything under the sun.
The other reason is his crackdown on banks on the issue of non-performing assets. The resultant credit squeeze had hit, among many others, corporates close to prominent figures in the current regime. Complaints were piling up on their doorsteps.
On the first point, Patel is the anti-thesis of Rajan. In 44 months with RBI, only one speech of Patel&’s appears on the central bank&’s website. Patel&’s preference for flying below the radar should come as a relief to a Rajan-hit government.
The crunch will come on the second because Patel is said to be even more hawkish than Rajan on the issue of bad loans. Financial analysts believe that he will stick to current policy and insist that banks clean up their balance sheets before handing out more credit.
The biggest loser in the entire episode is Swamy who has been made to eat humble pie for slamming Rajan for an “unIndian’’ mentality. Patel&’s education and professional pedigree is pretty much similar to Rajan&’s. In fact, Patel is entirely foreign educated. As for “unIndian’’, Patel applied for an Indian passport only in 2013. Swamy has tweeted that he will not criticse Patel. The new RBI governor is Modi&’s choice after all. Wonder what he&’s saying privately about the slap on his face.
A tussle between NSA Ajit Doval and ministry of external affairs over union home minister Rajnath Singh’s recent disastrous visit to Pakistan to attend the SAARC home ministers’ meet has left Doval bruised. The visit didn’t quite turn out the way it was envisaged. Rajnath was cold shouldered by the Pakistanis who ensured that his speech to SAARC gathering was blacked out by the media. No media person, including accompanying Indian journalists, was allowed access to the venue or given copies of his speech containing a strong message to Pakistan on cross border terrorism.
Interestingly, not only was Rajnath reluctant to go MEA too was opposed to the trip. MEA felt that India should send a lower level representative, either an official of the home ministry or a minister of state. Not the cabinet minister.
Doval, however, insisted that India should not lose this opportunity to tick off Pakistan on terrorism. And who better to convey this message but India&’s home minister. He had his way despite MEA&’s opposition. But the Pakistanis proved too smart as they blacked out Rajnath&’s speech.
Rajnath returned quite upset as he realised that the Indian delegation was outmaneuvered by Pakistan. RSS hawks too were upset and they are believed to have given their feedback to the government.
Consequently, on the invitation to finance minister Arun Jaitley for the SAARC finance ministers’ meet, the MEA&’s line has prevailed. Jaitley will not be going. The government has to decide whether to send an official to represent India or a minister of state.
All in the family
Many in the BJP were irritated by the leadership&’s decision to schedule the foundation laying stone ceremony for the new BJP office on Raksha bandhan. Raksha bandhan falls on purnamashi, which is considered auspicious, which is probably why the day was chosen to lay the foundation stone.
But Raksha bandhan is also a sacred festival for brothers and sisters and most leaders had planned breakfast or lunch family gatherings that day. They had to cut short the celebrations or reschedule them to be present for the ceremony at the new party headquarters.
Some were heard grumbling that the current leadership doesn’t care for these family festivals because they are not family men. But we have families and they attach a lot of importance to traditional festivals like Raksha bandhan, one leader complained.