Here's how Raghuram Rajan became René Higuita of central banking

At a recent function in Mumbai, to launch the United Payments Interface, Reserve Bank of India governor Raghuram Rajan explained how central bankers should take considered risks. As an example, he pointed out how the RBI decided to give payments bank licences to a few corporate which did not have financial sector experience. Rajan is indeed a risk-taker and it is clear from his many actions and words, not just the payments bank licensing. As he has decided not to go for a second term at the central bank, despite his openness to complete the steps he had taken, there is reason to believe that it is this boldness to take risks that has cost him the job. In his nearly three-year stint at the RBI, he expressed his opinion about many things, some of which, his critics allege, did not come under his purview. One instance definitely is the speech given at the IIT Delhi, in which he pointed out the importance of tolerance and respect in the economic progress. He exhorted the students to “remember our tradition of debate in an environment of respect and tolerance”. In order to keep “the idea factory open”, we should “foster competition in the market place for ideas” and this is possible by “encouraging challenge to all authority and tradition”, he said. “Should ideas or behaviour that hurt a particular intellectual position or group not be banned? Possibly, but a quick resort to bans will chill all debate as everyone will be anguished by ideas they dislike. It is far better to improve the environment for ideas through tolerance and mutual respect,” he said. [caption id=“attachment_2843346” align=“alignleft” width=“380”] Prime Minister Narendra Modi with RBI Governor Raghuram Rajan. PTI[/caption] The word tolerance/intolerance appeared at least eight times in the speech. Coming at a time when the Indian political system was witnessing a raging debate about rising intolerance after the BJP-led NDA came to power, these words were seen as a criticism of the then prevailing situation. Many eminent literateurs and film personalities were returning their awards – as protest triggered by the killings of rationalists such as MM Kalburgi, Govind Pansare and Narendra Dabholkar. Despite the pressure building up, the government, especially Prime Minister Narendra Modi, did not utter a single word condemning the attacks, that were perceived to be an assault on the freedom of expression. Clearly, Rajan’s exhortation to challenge the authorities and tradition did not go down well with the powers that be and their blind supporters. That is the reason why nobody from the government lent a support for Rajan when he was faced with baseless and nonsensical crtiticism from BJP leader Subramanian Swamy. Finance minister Arun Jaitley saying he does not favour personal attacks is more a criticism of Swamy’s antics than a support for Rajan. Modi’s view that Rajan getting an extension is an administrative subject and should not be an issue of interest to the media, was by far a way to skirt an important question. Or even an indication that he did not approve of Rajan. Seen in this context, Rajan’s decision not to take up a second term at the RBI should worry all those who are concerned about not only India’s economy, but democracy. One criticism of Rajan has been that he stepped out of his brief and spoke about issues that do not come under his purview. These critics have in their mind his aforementioned words on the importance of tolerance in an economy. But such a view is baseless in the present age when interdisciplinary-ism is the buzzword, boundaries are blurring and compartmentalism is waning. Why should economists be not allowed to speak about freedom of speech and expression? Why should not a central banker express his views about tolerance or lack of it in the economy for which he functions? To drive home this point, an analogy of René Higuita – the legendary Colombian goalkeeper who risked stepping out of the goal post to dribble with the ball – will come in handy. This analogy was used by famous Malayalam writer N S Madhavan in one of his much acclaimed and discussed short story titled Higuita. In the story, Father Geevarghese steps out of his society-mandated role of being a Father at a church to physically defend Lucy Marandi, a tribal girl, from her tormentor. In doing so, he is driven by his urge to express himself socially. By defeating the tormentor, Father Geevarghese asserts himself as an inherently political personality. In fact, what Rajan proved was that he was the Higuita of the central banking – a considered risk he took not only in the economy and banking space, but in the political space too. As writer and thinker Goplalkrishna Gandhi wrote in a recent article in The Hindu, by doing so Rajan has shown that he “is a thinking man, a strong man — a much-needed and scarce combination”. “The country’s central banking institution needs a resilient brain, not a programmed robot to guide the fortunes of the rupee. Dr. Rajan’s is such a brain which, in addition, has the humour needed to protect it from robotising. But even as he shrugs criticisms off with a laugh, a great many if not most from the class of ‘intellectual India’ have led themselves into a self-censoring silence over Big Brotherisms,” Gandhi said. And that precisely is the importance of Rajan and his views. By dithering on giving an extension for Rajan at the RBI and forcing him to take a decision on his own, the government is also showing that there is little space for dissent in this country. The government’s approach towards Rajan is particularly shocking as it has disregarded many international economists and experts who urged the government to allow continuity at the central bank for the good of the economy. Also this development forces one to doubt whether PM Modi’s commitment towards the Indian economy is indeed serious. His promises of high growth and poverty eradication fall flat much like his promise of “freedom of faith, speech and franchise” in India, where violence against religious and cast minorities has become a major issue after his ascension to power. It is not about Rajan the economist, because the government may get somebody else who is as efficient as him. And it is not only about the economy but also about the freedom of expression. And so, as Rajan departs, not just the economists, we all should be worried, because it is another assault by this government on a democratic institution called RBI.