The champions of free markets, the advocates of economies where market forces decide what’s best, have been shedding virtual tears for the past 24 hours or so. Raghuram Rajan, the poster boy of an able and robust banking system called it quits and announced his intention to go back to academia after his term ended in September 2016. And grief struck. A lazy Saturday translated into a frenzy Monday, with obituaries, analyses of his tenure, of his “I am Raghuram Rajan and I do what I do” statement and what not followed. I can only imagine newsrooms across the nation going into a tizzy, dailies calling up regular columnists and asking them if they could pen a story, about 1000 words as soon as possible. The elders of this fraternity have been reserved for Monday, when more words will pour. Some other chose to pay their Delhi-style-Virat-Kohli-Andrew-Flintoff kind of respects to the present government and of course Subramanian Swamy, who wanted Rajan out because he was ‘not mentally Indian’.
Raghuram Rajan came in at a time when the inflation was abysmally high and the non-profitable asset situation of almost all public sector banks was spiralling out of control. In came the rockstar, whose eulogies, more often than not had sexual overtones rather than an understanding of how economies performs and why money appreciates or depreciates. I wonder how many times over the years, his wife Radhika, mumbled under her breath and cursed Shobhaa De and the likes. The suited-booted Central Bank governor became social media’s favourite time and again, in these three years, first when he saltued the security guard who saluted him and then later with his famous James Bond dialogue “I do what I do”. And true to his style, he bowed out when nobody expected him to, in a rather sublime fashion, by writing a letter to his colleagues at the Reserve Bank of India. While the emotions flowing behind Rajan’s exit, coined #Rexit, is understandable, it is overhyped.
First things first. He was good for the economy till he was. He enjoyed his tenure and took all decisions, without any hesitation whatsoever. It would be wrong to say all was well during his term of three years, which has not yet ended. Very often than not, the central banker did not agree with the government’s ideas on inflation and the ways to control them. A suave speaker that Rajan is, he never minced his words, when it came to issues on either inflation or intolerance. He wielded his baton on banks which seemed to misperform, on businessmen who flaunted when they owed money and so on. And that resulted in sparks, lava which bubbled out in various forms, without overflowing altogether. The finance minister Arun Jaitley and his junior, Jayant Sinha, had more often than not semi-public showdown with Mr Rajan. Now, to a smart investor, the big hedge funds, this will seem like a positive step, something good for the country. That is because, in one of the fastest growing nations, when the finance minister does not agree with the central bank chief, it shows that the two are not in bed, nodding on all decisions, right or wrong. A hand-in-glove situation where the central bank agrees to whatever the government says could have major ramifications, as in the case of Zimbabwe and Egypt.
More so, to the electronic herd, this lover’s tiff always looks magnified. The herd, which consists of traders and investors are more of skeptics who gallop at the first sign of trouble. The next time they see the finance minister and the central banker fighting publicly over key interest rates, they will exit at the speed of light. Anyone who understands money markets will conform to this. They may undoubtedly come back later. By then, India will have taken a significant hit on its foreign investments and currency.
Thirdly, thanks to the naivete of many political leaders, some of them of the status of Swamy, there has already been too much politics around this issue. Whether Rajan should stay or leave should have been his call in totality. That has however not happened. It is thus best, that a man as upright as Rajan, leaves before someone flings mud on him, which would further impair the impeccable career he has had so far. Do remember that this is the same Raghuram Rajan, who chose Alan Greenspan’s retirement to warn the world of an impending economic crisis. And damn right he was. A man who picks the moments where one has no choice but to notice his words is an honest man, with integrity, and priorities as straight as the arrow. And arrows most often, when they hit the target, cause immense pain. I do not think India is really ready to bear that kind of agony.
Penultimately, hard as it sounds, no democracy, no matter how robust, should depend on one person, no matter how brilliant he or she is. A democracy runs when all wheels run in perfect alignment. Even the smallest of socket balls missing produces noise which does not let you sleep in peace. Rajan was the perfect wheel, the most able driver of central banks. Now that the time has come for him to step aside at the end of his tenure, he must. Rajan cannot afford to become another Sachin Tendulkar. He must quit at the moment, like Rahul Dravid, when his team needs to. As far as the market’s reaction goes, any negative waves will be short-lived. Rumors have been floating around for quite some time and most big players have already factored in his exit. They are prepared to take that hit, and square it off at the earliest. One would have often heard the saying that markets run on emotions. The same markets are very emotion-dry as well. A war prompts investors to buy more gold. So does a humanitarian crisis. They term it “safe-haven buying”. In layman terms, it is called “saving your ass”.
Lastly, Rajan was a misfit. In the current scenario, when saffron rules the roost for this government, Rajan was more of a flagpole, rather than the RSS flag. He would have hurt the government’s ideologies, its political commitments more than anyone else. A man who speaks his mind is the one will not bow before anyone, no matter what. For such a man, it is necessary that he leaves for his own good, before he gathers enemies from this air. Mr. Rajan does not need that. Mr. Rajan does not deserve that.
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