Swamy vs Rajan: Support for RBI chief swells; why can't BJP make up its mind?

The irony is hard to escape. BJP legislator Subramanian Swamy's attack on Raghuram Rajan has only increased the popularity and support the Reserve Bank governor enjoys, at least among those who are serious about the country's growth.

As Firstpost finance editor Dinesh Unnikrishnan noted earlier Swamy is wrong on several counts. For one, Rajan brought back the credibility to the Reserve Bank's functions. Secondly, Swamy's economic rationale - that Rajan held interest rate high and wrecked the economy - for the call to terminate his term is just half truths or rather a nonsensical argument.

RBI Governor Raghuram Rajan. PTI

RBI Governor Raghuram Rajan. PTI

R Jagannathan too noted in an article on Tuesday that it doesn't make sense in blaming Rajan for the economy not yet picking up. Moreover, the government itself has signed an agreement with the RBI to bring down inflation. So first thing for the government to do will be to end the agreement if it wants the RBI to cut rates.

But that will be detrimental to the economy because the monetary policy framework has been hailed by many economists as path-breaking development.

“This will make monetary policy more transparent. Coordination between the government and RBI will be strengthened further....With the new monetary policy framework being formed, there will be broader monetary policy participation by the committee,” D K Joshi, senior director and chief economist, CRISIL, had been quoted as saying in a report in the Buisness Standard.

The business community has also to rejected Swamy's arguments. Former Infoscion Mohandas Pai termed them "silly".

Right wing economist PN Vijay also thinks Swamy is wrong in his move.

A poll done by the Economic Times showed Rajan has overwhleming popular support. According to this report, of 9,168 readers who responded to the poll, 87% wanted Rajan to to continue as the RBI governor.

The barbs have also taken a political hue with senior Congress leader Jairam Ramesh weighing in on the issue. He reacted sharply to the attack on Rajan saying why Swamy does not hit his "real target" Finance Minister Arun Jaitley but "set up dummy targets" like the RBI Governor who cannot speak out.

However, BJP spokesperson on economic affairs Gopalkrishna Aggarwal said Swamy is a senior leader whose opinions "definitely matters" but added the final say will be with the government.

According to a report in The Indian Express, indications from at least three BJP leaders suggest that the latest letter from Swamy to prime minister Modi has not embarrassed the party.

“The BJP as a party has no say on it. But there is a consensus that we need to move to a low interest rate. But it’s the RBI’s decision and it is independent. Interest rate is an important component in managing inflation,” Agarwal has been quoted as saying in the report.

In essence the party seems to be wanting to distance itself from the controversy but is finding it difficult to make up its mind.

It is in such times that the country wants the prime minister to speak up and say what he thinks about the issue. But that may be asking too much from Modi who has always dragged his feet when it comes to important issues - be it beef killing at Dadri or rising intolerance.

With inputs from PTI


Published Date: May 18, 2016 09:02 am | Updated Date: May 18, 2016 10:14 am


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