Govt vs RBI governor: Raghuram Rajan could be right after all

Taking offence to criticisms comes easy for ministers, especially when they come from the head of an institution that has had a love-hate relationship with the government. However, this time, they may have to take their offence back over the “words” chosen by Reserve Bank of India (RBI) governor Raghuram Rajan.

Earlier this week, Rajan was in the midst of a moderate controversy when he likened the state of the Indian economy to a “one-eyed king in the land of blind”, quoting the Dutch philosopher Erasmus, in an interview to a foreign journalist.

While finance minister Arun Jaitley, though subtle in his comments, rebutted the governor saying “India was growing much faster and in fact the fastest”, minister of state for finance Jayant Sinha and Union commerce minister Nirmala Sitharaman were disappointed with the governor on his “choice of words”.

Clearly, the ministers picked the phrase (ignoring the rest of his words from the interview) and were offended that India’s growth was being belittled or rather the government’s efforts were not appreciated on a global platform.

However, when it comes to Rajan, he has his own style of clarifying controversies and hardly goes on a guilt trip, but further justifies his point.

Known for his gift of the gab, Rajan after quoting the Dutch philosopher took to India’s most revered leader Mahatma Gandhi to silence his critics.

Quoting Gandhiji’s phrase that “an eye for an eye would make the whole world go blind”, Rajan said his focus was on the absurdity of a policy of revenge, not on blindness. He also apologised to a certain section of population … “the blind” but not to his critics.

Drawing loud applause from the audience, which included graduating students of National Institute of Bank Management, Rajan apparently stood out as a winner.

The Narendra Modi-led government in the last one year has taken offense to a lot of “anti-India” stance. However, picking a few words of a hard-nosed and witty Rajan may not quite prove its stance.

Rajan not only called India the “one-eyed king” but also recognised the government’s efforts for focusing on fiscal consolidation, and said that enough macro stability has been achieved.

Inflation is down and investments are picking up and things are falling into place, the RBI governor said. He also pointed out the exciting stuff like mobile-to-mobile transfers is happening. Nothing of all this can be referred to denigrating the Indian economy or of not being appreciative of India as a “bright spot”.

The “war of words” between the finance ministry and the RBI governor over the many years has been highlighted well in the media. But noting the presence of the same media, Rajan makes his stand clearer to an even larger audience beyond those offended.

The critics (the government) often get swayed by the words and actions and forget that central banks have a completely different mandate of being the neutral regulator than resort to sycophancy. In Rajan’s words, they are not cheerleaders of the economy and have to take a stance that appears to oppose the government in the interest of macro and monetary stability.

Rajan’s critics may have managed to take his words out of context but world over has proven to minimize the shocks of the global economic impact on India.

In his speech addressing the management graduates, he clearly conveyed that words matter but so does the intent. And he very well proves that his intent is conveyed.