Rajan exit shows India in poor light, say experts

20 Jun 2016


Calling Reserve Bank of India governor Raghuram Rajan's exit a 'bad omen' for the Indian economy, eminent economists and former policymakers said on Sunday that this will be seen by the world as India's non-approval of a policy against inflation and bad loans.

Rajan's colleague at Chicago University Booth School of Business Luigi Zingales termed it is a ''huge loss for India'', while Harvard University professor Gita Gopinath said it was ''deeply disappointing'' that the government instead of fighting hard to keep Rajan, has let him go amid all the distasteful comments by those questioning his commitment to India's best interests.

Nobel laureate Amartya Sen had said on Saturday that India was losing one of the most skilful economic thinkers in the world.

''We are losing one of the most skilful financial economic thinkers in the world. It is sad for the country and it is sad for the government of the country too. RBI is not a completely autonomous institution,'' he said in a TV interview.

Noting that he is not a great admirer of the Modi government, the economist said the administration will have to decide what it wants in its policy.

Indian-origin economist and British Labour Party leader Meghnad Desai said he feels ''sorry for India's reputation abroad'', while World Bank's Chief Economist and India's former Chief Economic Advisor Kaushik Basu said Rajan has been one of the finest central bank governors anywhere.

Rajan, 53, has been praised for rightly predicting the 2008 global financial crisis.

Rajan indicated he would have taken on a shot at a second term if he had got the right signals, saying he was ''open to seeing'' through his unfinished work on containing inflation and cleaning up the books of bank – a clear indication that the Modi government wanted him out.

This is being seen in some quarters as his unhappiness over the way things have developed in recent months with regard to a barrage of personal attacks on him from some quarters and the government reaction to that.

Gita Gopinath told PTI history will judge Rajan as one of the most effective central bankers of not just India but of the world.

''This is a very sad day for the Indian economy and it is deeply disappointing that the government instead of fighting hard to keep Rajan has let him go amidst all the distasteful comments including those that question his performance and his commitment to India's best interests,'' said Gopinath.

Desai said it is a pity that Rajan decided to go and the task of his successor, whoever he or she is, will be very difficult.

''I am not surprised but sorry for India's reputation abroad. He was criticised for doing what a central banker has to do. It will be seen by the world at large that an anti-inflation policy, a policy of cleaning up non-performing assets of banks and being tough on banks' balance sheets are not policies which meet with approval in India,'' Desai said.

Former finance secretary Arvind Mayaram also expressed disappointment and said Raghuram Rajan's decision not to seek a second term would be very costly for the economy.

''Raghuram Rajan's decision not to seek second term would be very costly for the economy. Not a good omen,'' Mayaram tweeted.

Zingales, who recently wrote that Rajan was being attacked for fighting the inefficiencies of the banking system and taking on crony capitalists in the country, tweeted, ''Rajan leaves RBI to come back to Booth. A great gain for us, a huge loss for India''.

Zingales, who has also been Rajan's co-author, recently wrote in an article that the central bank governorship in India earlier used to be ''entrusted to grey bureaucrats that left no impact''.

''Rajan, however, is the dream of the new India: young, competent, and reached the top of the Indian central bank because of his skill, not because of his political alignment,'' he had said.

(See: Indian, world business disappointed as Rajan calls it a day and There is more to RBI than governor: Rahguram Rajan )

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