Is there a method to Subramanian Swamy’s quarrel with Reserve Bank of India (RBI) governor Raghuram Rajan that has been hogging headlines in the national media for the last few days?
There is no instance in the past when criticism of RBI governors or the issue of their re-appointments have received this sort of attention.
Prime Minister Modi said in an interview to Wall Street Journal that Rajan’s reappointment is an administrative decision and it shouldn’t be an issue of media’s interest.
It’s hard to believe that Swamy’s new-found hatred of the economist-turned central banker is purely on account of the maverick politician’s disagreement with Rajan’s economic policies. Look at the manner and the timing of Swamy’s tirade against Rajan. He is unleashing an all-out attack on Rajan (Swamy’s `mentally Indian' remark was on 17 May) just four months ahead of the governor’s term coming to an end.
In the last three years of Rajan’s term, rarely has Swamy gone all-out against him, especially with regard to the governor’s personal integrity and patriotism.
Swamy's tirade is well-timed. It is time for the government to hunt for Rajan’s successor, in case it does not want to extend the term of the incumbent.
Swamy, no outsider
Swamy is no longer an outsider to the BJP-government or a one-man army. He is counted among the senior leaders of the party and is someone closer to the BJP’s ideological parent, the Rashtriya Swayam Sevak Sangh (RSS).
If Swamy is unleashing such a vigorous campaign on an institution of the RBI’s stature, it cannot clearly be without the confidence of his bosses in the BJP and RSS. If it was a Swamy vs Rajan issue and the BJP were to not support it, Swamy would have got a gag order from the central leadership after his initial remarks against Rajan (mentally fully Indian). But look at what happened after that first remark from Swamy. He went ahead with his second round of attack against Rajan and this time it was more personal. These include Rajan’s occasional trips to the US to renew his Green Card, sending "confidential and sensitive" financial information to various persons around the world from unsecured email ids and Rajan’s ‘intolerance remarks’.
Even though top leaders, including party president Amit Shah, Finance Minister Arun Jaitley and Venkaiah Naidu, have publicly distanced themselves from Swamy’s campaign against Rajan, it is clear that there is no clear warning against Swamy, who has been contradicting his own party colleagues when he blames Rajan for ‘unemployment and collapse of economic activity’.
Letting Swamy loose with his tireless tirade against the RBI governor in full public view can work as a clever strategy if the government wants to quietly oust Rajan from the RBI governor’s position once his term comes to an end in September.
Rajan worth a second term
The government doesn’t have an easy explanation to discontinue Rajan, who is at the peak of his job as the central bank governor and is widely receiving recognition and credit for overhauling India’s banking sector and the way the monetary policy was conducted.
Forget about terminating him, there are strong reasons for the Modi government to give him a second term.
When Rajan's performance (Swamy's comment on impact of high interest rates hurting the growth and causing unemployment) and his personal credentials (allegedly aiding Karti Chidambaram in Aircel-Maxis deal in the capacity of a RBI governor) are questioned by one of the senior members of the party, who is also an economist and an academic of international repute, it is relatively easier for the government to explain its decision if it chooses not to give him a second term.
Remember, it’s just not Swamy in the party who has criticized Rajan. Other BJP leaders including Minister of State for Finance, Jayant Sinha and Commerce and Industry Minister, Nirmala Sitaraman too have criticized Rajan’s remarks on the Indian economy.
Now, why would the government be unhappy with Rajan? Well, there are several reasons.
Ever since the Modi-government has come to power, Rajan has been critical of the government’s several initiatives including his remarks on the rocket-speed implementation of Pradan Mantri Jan Dhan Yojana, Make in India strategy, the growing environment of intolerance in the country, questioning the GDP numbers and recently his ‘one-eyed King in the land of blind’ remark on the state of the Indian economy.
The government wouldn’t be certainly happy with one of its most reputed economist and central banker in the world constantly criticizing it in broad daylight in the remaining three years of its rule .
The short point is this: One cannot rule out the possibility of a covert political strategy that is stimulating Swamy’s tirade against Rajan. Very unlikely, Swamy is a one-man army in this episode. There seems to be a method in the madness of his Rajan-Hatao campaign. If indeed that's the case, it is only logic that Rajan wouldn't get a second-term at the central bank.
As Firstpost has noted in the past, there is a strong case for the Modi-government to offer another term to Rajan to ensure continuity of the ongoing structural reforms in the banking sector, clean up of bank balance sheets and, more importantly, to reassure investors that the RBI continues to be an independent institution.
Published Date: May 27, 2016 06:15 pm | Updated Date: May 27, 2016 08:22 pm