Modi administration’s roller-coaster relationship with Raghuram Rajan
When Raghuram Rajan took over as RBI governor amidst a gloomy economy in , The Economic Times showed him as James Bond in a. The positive working relationship between Narendra Modi and Raghuram Rajan is helping counter the narrative of disappointment since Modi. “The Modi-Rajan equation reminds us of that between Volcker and two already had a working relationship when Rajan took over at the RBI.
But as a central banker, I cannot get euphoric with India's economic growth rate as it is at the cusp of a substantial pick-up in growth.
I see scope to grow faster, given the capacity utilisation and agricultural output," he said. Even if we can overtake China in terms of growth rates, the magnitude of the effect will be far smaller for a long time to come. Apologise he did, but only for offending the visually impaired. On another occasion, Rajan said, "I cannot get euphoric if India is the fastest growing large economy We cannot get carried away by our current superiority in growth, for as soon as we believe in our own superiority and start distributing future wealth as if we already have it, we stop doing all that is required to continue growing.
This movie has played too many times in India's past for us to not know how it ends. Every time an exporter comes to me and says that stability has been very valuable for us to make decisions, that reinforces my view that these our main role is not to act as cheerleaders," he explained.
But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism," he said on another occasion. Intolerance And The Economy Amidst the intolerance debate, Raghuram Rajan gave a speech in which he emphasised the need for tolerance, even as the Modi government was busy saying there's no intolerance in the country.
Rajan said tolerance of ideas and dissent was necessary for start-ups and economic activity. Without this competition for ideas, we have stagnation," he said.
He said, "Tolerance means not being so insecure about one's ideas that one cannot subject them to challenge — it implies a degree of detachment that is absolutely necessary for mature debate. Speakers have to be more careful with words and not be gratuitously offensive.
10 Raghuram Rajan Comments That Made Modi Government Squirm | HuffPost India
At the same time, listeners should not look for insults everywhere, and should place words in context so as to understand the intent," he said. In June last year, Rajan said that there was a "contradiction" in the economy growing at 7. Taking a dig at the government's push for interest rate cuts, he said, "It is a sort of discrepancy in the eyes of the world that why we still think the economy needs rate cut when it is growing at 7.
But Rajan is no politician who could endlessly engage in the dirty game that Modi government threatened to drag him into through the likes of Swamy. For someone who values his integrity and whose decency forbids him from such a quarrel, the risk of his image being regularly sullied must have weighed on his minds; also a government not to eager for his continuation would have made his job still harder.
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Undermine global confidence in India Rajan was a darling of international investors. As long as Rajan was there, the international investor could rely on him to get the true picture. His unmatchable credentials in the field of economics also boosted confidence in India.
In these turbulent times, his presence ensured the international community still retained its confidence in the Indian economy. Endanger the clean up of banks Rajan's honesty, his deep understanding of economics and his international standing which made it difficult to push him around, ensured the much-needed clean up of banks was gathering momentum.
The banking rot that has threatened India's financial system and even its economy at least looked to be controllable with Rajan at the helms of the RBI.
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But with Rajan bowing out, this clean up will be in danger. The person who replaces Rajan will most probably have far less understanding of the field of finance to deal effectively with the complicated situation. Even in the face of much pressure from government the RBI governor never relented, further signalling to the market that at least under him the RBI's priority won't change by the day.
Now when, inflation seems to be on the upswing, Rajan demitting the office can again boost inflationary expectations. A disdain for oligarchs, a vision to modernize and a desire to leave a meaningful legacy in India. Perhaps most importantly, both are anti-establishment outsiders. A measure to simplify the tax regime is stuck in parliament and proposals to ease land and labour rules have been shelved.
Even so, other moves are gaining steam. The next major test will be the budget on 29 February, Rajan has warned that bond yields could rise if Modi strays from the path of fiscal consolidation.
Any deviation from a roadmap to narrow the budget deficit to 3. On the other hand, Modi faces pressure to boost civil-servant wages and increase spending in rural areas hard hit by drought.