 "How politics played a role behind the scenes")
That the larger Sangh Parivar was unhappy with Reserve Bank of India (RBI) Governor Raghuram Rajan for his views on issues such as “intolerance” was no secret. The die was cast when Subramanian Swamy, a Rajya Sabha member from the Bharatiya Janata Party (BJP), wasn’t reined in when he went as far as calling Rajan’s policies “anti-national in intent”. There were also severe difference of opinion between Rajan and those in the government, including in the Finance Ministry bureaucracy, on the RBI’s monetary policy, particularly on the issue of the central bank’s refusal to lower interest rates.
People in the government and industry had complained about Rajan’s obstinacy in not reducing interest rates, especially when the oil import bill was low and other macro-economic indicators were suitable. Those in the government and industry were looking at the RBI to reduce interest rates to spur growth in real estate and the MSME sector. A spurt in these two sectors, or so it was argued, would have contributed to job growth – one of the principal planks of Prime Minister Narendra Modi’s 2014 Lok Sabha campaign.
It was also deeply resented that Rajan had backers such as former Finance Minister P Chidambaram and Infosys co-founder N R Narayana Murthy. Both had gone on record asking for a second term for Rajan. The decision on a second term to Rajan, it was felt, would be taken after Prime Minister’s return from his five nation visit, including to the United States, earlier this month.
In his first comments after the development, Finance Minister Arun Jaitley said the government respected Rajan’s decision and a successor will be appointed soon. State Bank of India chief Arundhati Bhattacharya is being looked at as a possible candidate.
Swamy, currently in Bhubaneshwar, termed Rajan’s decision as “good”. Swamy had written to Prime Minister Narendra Modi to demand that Rajan be sacked as he is not "fully mentally Indian" and had been sending confidential and sensitive financial information around the world. “The reasons I had given (against Rajan's continuance) were all valid. He has realised he would not get a second term. That's why he has made a statement himself," Swamy said today.
BJP spokesman on economic affairs Gopal Agarwal said: “In the party, we have an opinion on various issues but this is between the government and the individual. The party has nothing to say, although there is always scope of debate on the shape of the monetary policy and there were differences of opinion with some quarters demanding that there should be lower interest rates. However, various people have also appreciated the RBI’s role in controlling inflation.”
The RSS feels Rajan quitting is its hour of triumph. “When he went to the IIT and criticised intolerance, the government's mind was made up that if he wants to go he should be allowed to go,” an RSS ideologue, who didn’t want to be named, said. A senior person in the government said that Rajan should have realized that “this wasn’t the United States where the society and its media had reached a stage of maturity and views of its central bank chief on issues other than economic aren’t blown out of proportion.”
Most of the several sources that Business Standard spoke to on the issue of Rajan's exit claimed that Rajan wasn’t asked to leave. They insisted that the PM and Jaitley weren’t averse to giving Rajan a second term but the pressure from Swamy, backed by the RSS, had escalated. His detractors argued that Rajan was arrogant and undermined democracy. “No RBI governor in the past has criticized democratically elected representatives,” a source affiliated to RSS said.
People in the government and industry had complained about Rajan’s obstinacy in not reducing interest rates, especially when the oil import bill was low and other macro-economic indicators were suitable. Those in the government and industry were looking at the RBI to reduce interest rates to spur growth in real estate and the MSME sector. A spurt in these two sectors, or so it was argued, would have contributed to job growth – one of the principal planks of Prime Minister Narendra Modi’s 2014 Lok Sabha campaign.
It was also deeply resented that Rajan had backers such as former Finance Minister P Chidambaram and Infosys co-founder N R Narayana Murthy. Both had gone on record asking for a second term for Rajan. The decision on a second term to Rajan, it was felt, would be taken after Prime Minister’s return from his five nation visit, including to the United States, earlier this month.
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However, according to one source privy to the Rashtriya Swayamsevak Sangh (RSS), the BJP’s ideological parent, and also the government’s views on economic issues, the departure of Rajan from the RBI is an end to “outside interference” in policy making. The RSS might exult at Rajan's exit as its triumph but the source said Rajan’s views on intolerance were only the last straw. The source likened his exit to one of the first decisions of the Narendra Modi government – that of kicking out 350 consultants who during the UPA years advised the government on various issues of planning and policy making. Another source went as far as to say that Rajan demoralised government owned banks and destroyed the economy, and his departure was a signal to crony capitalists supported by the previous UPA government.
In his first comments after the development, Finance Minister Arun Jaitley said the government respected Rajan’s decision and a successor will be appointed soon. State Bank of India chief Arundhati Bhattacharya is being looked at as a possible candidate.
Swamy, currently in Bhubaneshwar, termed Rajan’s decision as “good”. Swamy had written to Prime Minister Narendra Modi to demand that Rajan be sacked as he is not "fully mentally Indian" and had been sending confidential and sensitive financial information around the world. “The reasons I had given (against Rajan's continuance) were all valid. He has realised he would not get a second term. That's why he has made a statement himself," Swamy said today.
BJP spokesman on economic affairs Gopal Agarwal said: “In the party, we have an opinion on various issues but this is between the government and the individual. The party has nothing to say, although there is always scope of debate on the shape of the monetary policy and there were differences of opinion with some quarters demanding that there should be lower interest rates. However, various people have also appreciated the RBI’s role in controlling inflation.”
The RSS feels Rajan quitting is its hour of triumph. “When he went to the IIT and criticised intolerance, the government's mind was made up that if he wants to go he should be allowed to go,” an RSS ideologue, who didn’t want to be named, said. A senior person in the government said that Rajan should have realized that “this wasn’t the United States where the society and its media had reached a stage of maturity and views of its central bank chief on issues other than economic aren’t blown out of proportion.”
Most of the several sources that Business Standard spoke to on the issue of Rajan's exit claimed that Rajan wasn’t asked to leave. They insisted that the PM and Jaitley weren’t averse to giving Rajan a second term but the pressure from Swamy, backed by the RSS, had escalated. His detractors argued that Rajan was arrogant and undermined democracy. “No RBI governor in the past has criticized democratically elected representatives,” a source affiliated to RSS said.