Raghuram Rajan's 10 quotes: On intolerance, GDP growth euphoria, Jan Dhan

Reserve Bank of India governor Raghuram Rajan has finally called it quits. This ends nearly three months of speculation as to whether he will remain at the helm of the RBI or not once his term ends in September. While the number of detractors for Rajan was too few there were many who had openly supported a second term for him. The reason for the huge support from various quarters is his openness and straight forward way of dealing with issues. Also only because of this trait, he may have many a time irked the ruling political class with his open criticism of the government’s policies, actions and inactions. He has also taken on the crony capitalists who have drilled a huge whole in the the country’s banking system by way of bad loans. [caption id=“attachment_2842886” align=“alignleft” width=“380”] Raghuram Rajan[/caption] Here are 10 quotes that could have forced the political and the business community to sit up and think: On wilful defaults (read Vijay Mallya and his ilk) If you flaunt your yacht, massive birthday bashes, etc, even while owing the system a lot of money… it seems to suggest that you don’t care. I think that is the wrong message to send out. If you are in trouble, you should show that you care by cutting down your expenses. (In an interview to NDTV) It has often been said that India is a weak state. Not only are we accused of not having the administrative capacity of ferreting out wrongdoing, we do not punish the wrongdoer, unless he is small and weak…. No one wants to go after the rich and well-connected wrongdoer, which means they get away with even more. If we are to have strong sustainable growth, this culture of impunity should stop. (In a new year message to RBI staff) On intolerance So what does an educational institution or a nation need to do to keep the idea factory open? The first essential is to foster competition in the market place for ideas. This means encouraging challenge to all authority and tradition, even while acknowledging that the only way of dismissing any view is through empirical tests. What this rules out is anyone imposing a particular view or ideology because of their power. Instead, all ideas should be scrutinized critically, no matter whether they originate domestically or abroad, whether they have matured over thousands of years or a few minutes, whether they come from an untutored student or a world-famous professor. (In a speech at IIT Delhi) On Make for India (and not Make in India) I am not advocating export pessimism here – India has been extremely successful at carving out its own areas of comparative advantage, and will continue to do so. Instead, I am counselling against an export led strategy that involves subsidizing exporters with cheap inputs as well as an undervalued exchange rate, simply because it is unlikely to be as effective at this juncture. I am also cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work. (In the Bharat Ram Memorial Lecture) On fast-paced rollout of Jan Dhan scheme When we roll out the (Jan Dhan) scheme, we have to make sure it does not go off the track. The target is universality, not just speed and numbers… The system is going to be a waste if what we do generates a whole set of duplicate accounts. It is going to be a waste if you do not have full coverage. It is going to be a waste if those accounts are not used, they open and they languish. Many of the persons who are coming into the system are coming for the first time, so if we don’t make a good first impression, they will stay out. Let us ensure it works. (At FICCI banking confernce) On RBI’s defacto independence I would say de facto independence (exists) including in the kinds of people that the government has historically appointed as RBI governors and the kind of space it gives them. The Government of India has the right to give directions to RBI and tell what it should do; there is a clause (on this) in the RBI act. That direction hasn’t been given in the history of RBI. So, you have to distinguish from what is de jure from what is de facto and I think, de facto, RBI is independent. (In the press conference after the monetary policy in August 2015) On euphoria over India being the fastest growing economy As a central banker who has to be pragmatic, I cannot get euphoric if India is the fastest growing large economy. We have a long way to go before we can claim we have arrived. We need to repeat this performance (economic growth) for 20 years before we can give each Indian a decent livelihood. (In the speech clarifying his one-eyed-king analogy and apologising to the blind) On GDP calculation There are problems with the way we count GDP, which is why we need to be careful sometimes just talking about growth. We have to be a little careful about how we count GDP because sometimes we get growth because of people moving into different areas. It is important that when they move into newer areas, they are doing something which is adding value. We do lose some, we gain some and what is the net, let us be careful about how we count that. (In the convocation address to the students of the RBI-promoted Indira Gandhi Institute of Development Research) On India being the bright spot Well, I think we’ve still to get to a place where we feel satisfied. We have this saying, “in the land of the blind, the one-eyed man is king.” We’re a little bit that way. We feel things are turning to the point where we could achieve what we believe is our medium-run growth potential. Because things are falling into place. Investment is starting to pick up strongly. We have a fair degree of macro-stability. Of course, not immune to every shock, but immune to a fair number of shocks. The current account deficit is around 1%. The fiscal deficit has come down and continues to come down and the government is firm on a consolidation path. Inflation has come down from 11% to less than 5% now. And interest rates therefore can also come down. We have an inflation-targeting framework in place. So a bunch of good things have happened. There is still some things to do. (In an interview to MarketWatch) On media misinterpreting his words More generally, every word or phrase a public figure speaks is intensely wrung for meaning. When words are hung to dry out of context, as in a newspaper headline, it then becomes fair game for anyone who want to fill in meaning to create mischief. Worst, of course, are words or proverbs that have common usage elsewhere, because those can be most easily and deliberately misinterpreted. If we are to have a reasonable public dialogue, everyone should read words in their context, not stripped of it. That may be a forlorn hope! (In the speech clarifying his one-eyed-king analogy and apologising to the blind) On world slipping into 1930-like depression “We need rules of the game in order to effect a better solution. I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action. I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action. But I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth. And, I think it’s a problem for the world. It’s not just a problem for the industrial countries or emerging markets, now it’s a broader game.” (At a London Business School conference)