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Can BJP leader Subramanian Swamy barbs hit home, affect Raghuram Rajan review?

After making sparks fly, will there be a Subramanian Swamy effect on RBI policy review? Raghuram Rajan is all set to present his penultimate policy decision on Tuesday…

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RBI Governor Raghuram Rajan, who has left an indelible mark on the institution over the last few years, has come in for flak over his various acts of omission and commission from within the ruling Bharatiya Janata Party (BJP) dispensation. Surprisingly, Rajan has been attacked not just over his policy but even on the pesonal front, indicating an erosion of trust in the power echelons of the country as well as the BJP. (Reuters)

After making sparks fly, will there be a Subramanian Swamy effect on RBI policy review? Raghuram Rajan is all set to present his penultimate policy decision on Tuesday morning and, while it may not be the top-most thing on the governor’s mind, he will surely have thought of Swamy and his cutting attack on his decisions – not so much on the personal front, but more in terms of the effect that RBI policy has in driving, or moderating, economic growth in India.

Swamy, in his diatribe against Raghuram Rajan has listed a number of pain points PM Narendra Modi-led NDA government is suffering for which it is not finding effective solutions. While Rajan has said he does not have a ‘magic wand’ to make the pain disappear, of the government or the people, he will definitely have grappled with the problems Swamy raised in his usual acerbic manner.

On the personal sphere, Swamy has said Dr Rajan is ‘mentally not fully Indian’ for logging so many frequent flyer miles and having a US ‘Green Card’. The governor could even ignore the stinging barb by Swamy, “Mujhe lagta hai RBI Governor hamare desh ke liye anukool nahin hain. The sooner he is sent back to Chicago, the better it would be.”

However, what was intended to hit home was Swamy saying, “Governor Rajan is hurting Indian economy.” With growth numbers not managing to create the kind of feelgood factor that the country is desperately craving for, and the NDA government firmly indicating its preference for rate cuts to boost GDP growth more in line with the tag of being the fastest growing major economy in the world, ‘rather than the aandho mein kana raja’, Rajan would be on the horns of a dilemma. Are the numbers aptly reflecting reality or did he miss anything? Surely, the governor is human and weighing the pros and cons always calls for putting yourself out on a limb.

The following words used by Swamy are well calibrated for wreaking maximum damage, “The concept of containing inflation by raising interest rates is disastrous. He (Rajan) believes in raising interest rates to decrease inflation. This approach is like murdering someone suffering from fever, so that his body temperature drops.”

Subramanian Swamy has also said that he is “… shocked by the wilful and apparently deliberate attempt by Dr Rajan to wreck the Indian economy. These actions of Dr Rajan lead me to believe that he is acting more as a disrupter of the Indian economy than the person who wants the Indian economy to improve.”

With the Narendra Modi government targetting small and medium enterprises (SMEs) as one of the biggest drivers of growth in the Indian economy, lower rates become a must-have option and since Raghuram Rajan stands between that demand and the actual policy on ground, Swamy fired another salvo that the governor’s ‘policies have finished small industries’. “I have made comments on the basis of his (Rajan’s) wrong policies. He has finished the small and medium industries to help American multi-national corporations to come here and take over,” Swamy said.

While the American MNC angle harks back to the retro policies tilted towards socialism in India, what must have caught the Governor’s attention is the fact that India needs a ticking SME sector and it is a truism that they desperately need lower rates to function effectively and to grow in a tangible manner. On this sticking point, Swamy said he had actually asked PM to sack Rajan, saying that his (Rajan’s) insistence on high interest rate had led to recession in the domestic small and medium industries.

Weighing on the Governor’s mind would be farmer suicides, drought and other natural calamities affecting farm sector growth. Swamy’s barb on this that was intended to hit home was this, “The banking policies are anti-agriculture.” The crisis is crystal clear and it is not going to go away in a hurry. Agriculture is a sector that has been a challenge for all governments. But will this particular tragedy make Rajan take note and blink?

It is no one’s case that the labour market in the country is not rising, but Swamy took this opportunity to link massive unemployment in semi-skilled sector to Raghuram Rajan policies. He virtually insists that the solution lies in the Governor’s hand.

The last, but not the least, parting shot that Swamy took at Rajan would surely have made him open his eyes wide, even though that would be all he could do over the issue. Swamy alleged that the former IMF Chief Economist should have known the ‘inevitable consequence of rising and high interest rate and his policy was wilful and thus anti-national in intent’.

With his term almost ending and clarity over his re-appointment yet to come from the powers-that-be, will Raghuram Rajan cut rates on Tuesday. The consensus on the street is that he will stick to his guns and not cut rates. That throws up a crucial question: Has ‘Swamynomics’ day dawned? Surely, Rajan is best placed to take a call on it.

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