Rajan exits while Pahlaj, Chetan rule roost: Is Modi govt anti-talent?

The announcements of Raghuram Rajan’s exit and Chetan Chauhan’s appointment took place in the same week. Let’s take a moment or two to wrap our heads around this telling coincidence. The very same week that Rajan, a former IMF chief economist and one of the world’s most revered economic thinkers revealed that he is unwilling to serve a second term as RBI governor, the NDA government appointed as the head of National Institute of Fashion Technology (NIFT) an ex-cricketer called Chetan Chauhan, who also happens to be a two-time BJP MP. I am, however, not among those who believe that the RBI chief was “hounded out”. There is nothing to suggest, apart from idle and malicious speculation, that the highest echelons of the NDA government were disapproving of Rajan’s work beyond the occasional difference of opinion that is inevitable and even healthy in the hyper-sensitive issue of monetary policy, especially when it involves a rambunctious, multi-party democracy such as ours. [caption id=“attachment_2408524” align=“alignleft” width=“380”] Outgoing RBI governor Raghuram Rajan[/caption] There has been zero attempt on part of the government to encroach on the RBI chief’s space, or else Rajan’s tight monetary control wouldn’t have been so aptly complemented by Finance Minister Arun Jaitley’s fiscal discipline. But it is certainly the case that when the universally acclaimed central banker came under an unfair and rather crass ad hominem attack from BJP MP Subramanian Swamy, the Narendra Modi government did not do enough to create a perception that it stands firmly behind the RBI governor. More so when Rajan himself maintained a dignified silence despite repeated provocations. It is entirely possible that the outgoing RBI head, who is held in high esteem among academicians and central bankers across the world, wanted an early assurance on his second term from a government which was unwilling to commit itself beyond considering a field of candidates, effectively forcing him to reapply for his own job. It does not imply that he wasn’t going to be denied an extension though. That the prime minister certainly held such a belief became clear when he recently told Wall Street Journal on Rajan’s reappointment that: “I don’t think this administrative subject should be an issue of interest to the media… Besides, it will come up only in September.” As this  Reuters report points out, this may have been unacceptable to Rajan. “He felt it would belittle the position of the RBI governor if he had to appear before the committee,” the news agency quoted a senior commercial banker who knows Rajan personally, as saying. “It would reveal a lack of government support. Rather than have two more years of constant quibbling, he decided to go.” Let me stress this point. While the government’s position is by no means an unfair one, the prime minister, without a shadow of doubt, could have gone that extra mile instead of putting the widely admired technocrat through the “due process” if he was convinced that he absolutely needs Rajan. And Modi’s actions suggest that he clearly did not feel such a need. And that is unfortunate. Many industry captains, eminent economists and foreign investors believe that Rajan did his part in guiding the Indian economy through choppy waters of a depression-hit world economy. He strengthened the financial system and his skilful handling of monetary policy won the confidence of domestic and foreign investors. He also undertook the task of broadening access to banking systems and the cleaning-up of bank balance sheets — two areas where he achieved, at best, mixed results. But a process was set in motion. The RBI governor also maintained a fine balance between backing growth and not letting the inflation go out of control which had gone into double digits when the NDA came to power in May 2014. By not throwing his weight behind a man who disassociated India from the broader emerging market woes and brought credibility to the country as an investment destination, the prime minister may have chipped away at India’s credibility and undone a large part of the good work that he himself did by frequently visiting foreign shores to hard-sell India. Politics has a lot to do with perception. In fact, increasingly, politics is perception. It is the most powerful change-agent that makes or breaks a government. Modi came to power riding on a perception that he will bring “acche din” for Indians who were, once again, fed up with a perception that the UPA, especially in its second term, had become an inept and corrupt regime that ran on an engine fuelled by crony capitalism. For someone who was born in penury and yet never let circumstances dictate his ambition — rising through the ranks to reach the prime minister’s chair — it is inexplicable that Modi would let a perception take shape that his government values loyalty over meritocracy — a Congress party virus of which he promised to cure India. When a government that fails to retain an accomplished RBI chief, employs ’noted’ personalities such as Chetan Chauhan, Pahlaj Nihalani and Gajendra Chauhan as heads of its various institutions, it isn’t hard to guess that it sees little merit in talent and competence and rewards political allegiance instead. Let me be clear. Chetan Chauhan may have been a good cricketer in his own right, but that does not qualify him to be the chief of a fashion technology institute which — according to NIFT Act, 2006 — must have as chairperson of the Board of Governors (BoG) “an eminent academician, scientist or technologist or professional, to be nominated by the Visitor of the institute, which is the president.” The exit of an independent-minded Rajan and the appointment of pliant individuals in regulatory positions send an unmistakable signal that while making India Congress-mukt, the BJP is slowly metamorphosing into another version of its bête-noire.