Though Prime Minister Narendra Modi has taken time for deciding on the top-level appointments in the regulatory bodies like Sebi and Trai and also in the government, his selections have been good overall.
The decision to retain U K Sinha as Sebi chairman just before his tenure was to end and the appointment of R S Sharma as Trai chairman months after Rahul Khullar retired are among the examples.
But, in case of RBI Governor Raghuram Rajan, he failed to understand that it is the Indian government and monetary policy domain which needs Rajan more than Rajan needs the RBI job.
He came to India and took up the responsibility of chief economic adviser because the previous government wanted him to guide the monetary policy ultimately.
If he is not getting the same kind of acceptance from the NDA government, there is obviously no point in continuing as RBI Governor.
In fact, the controversy surrounding the extension of his tenure as RBI Governor is unprecedented, and it doesn’t go with Rajan’s stature.
So, his letter written to the RBI staff today (Message to RBI staff from Raghuram Rajan), putting at rest all the speculations about his continuing at RBI after his current term ends on September 4, is not at all surprising.
Raghuram Rajan is not someone who would wait for months to hear from the government that he has been retained as the RBI Governor.
The operative part of his letter makes this very clear and also the mistake that the NDA government has committed by creating circumstances that has led to his decision of returning to the academic world: “I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished. While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term. While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country when needed.”
Rajan’s detractors may take this as their victory, but for the NDA government, and especially PM Modi, this is a big loss, and they will realise this very soon when they start looking for the next RBI Governor.
