"My music is best
understood by children and animals."
—Igor Stravinsky (Russian,
1882-1971)
Word for the day
Cater-Cousin (n)
An intimate friend.
Malice towards none
Mr. Market is perhaps the
most cruel person around - He just destroyed the halo around Gov. Rajan within
20minutes of the opening trade on Monday(:-
First random thought this morning
Heard from an executive of European engineering company - (a)
Investment in railways core infrastructure has not picked up despite lot of
noise; (b) Smart city development is still on drawing boards, though the
government officials are meeting the developers and solution providers.
Hopefully execution will begin this Diwali; (c) The power equipment sector has
material unutilized capacity and may not need capex in next couple of years.
Who is Rajan? What does he do?
In past 15years, my wife (a post graduate in Hindustani classical
music and English literature) has been my barometer for judging the popular
public opinion on any issue. I am usually able to assess the gap between
"reality" and the "media presentation" of an issue by
7.30AM when she finishes reading newspaper with her morning cup of tea and
throws a barrage of questions on me.
Yesterday morning was no exception. The first question she fired
was sufficient to explain the frivolity of whole controversy over the Governor
Rajan. "Who is this Rajan fellow dominating the headlines this morning
(she does not watch news on TV)? Looks very handsome!", she enquired at
7AM, her tea still unfinished.
It took me precisely 30seconds to find answers for all the queries
I had been struggling with since Saturday evening. I knew instantly that
Rajan is a superstar of Mint Street, darling of the media and ping ball of
politicians, having little connection with the common man.
The following five questions fired by my wife in quick succession,
without waiting for my answer, destroyed the whole fracas build over his
decision to not to seek a second term.
(a) If Rajan successfully
reigned inflation why tomatoes are selling at Rs60/kg and people are blaming
Modi for this and not the governor?
(b) Why my NRI brother
still gets 9.5% interest on his fixed deposit with SBI, while my small deposit
is getting renewed at 7%?
(c) Accounting I do not
understand. But tell me how much money banks have recovered from defaulters in
past three years? My poor niece who works so hard for a bank, 13hrs a day and
often on weekends also, did not get any bonus this year, because her bank
passed some accounting entries!
(d) If Rajan's departure
will severely dent India's credibility in the international markets, what is
the role of the government? Was RBI really not a respectable institution before
Rajan?
(e) Who is this El-Erian
fellow? What business he has telling our sovereign government that failure to
retain Rajan for another term will have serious consequences for India? Is he
some terrorist or what?
I am actually thoroughly incompetent to answer these innocent
questions. But after spending many hours in trying to answer the queries and
worries of my readers since Saturday evening, I am sure that departure of Rajan may be a Good thing for Indian economy.
Insofar as the policies and programs are concerned, we have faced BoP crisis on many occasions in past. Every time we have modified our policies
and introduced new schemes/programs to tide over the crisis. On all occasions
we have been successful - 1991 being one case in point. S Venkitaraman, C.
Rangarajan and then Bimal Jalan saw us through that crisis. Inflation and rates
fell materially over that period. We sustained Asian crisis, global sanctions,
and dotcom crash successfully and emerged stronger.
But none of these governors sought to undermine the stature of RBI
as an premier and respectable institution. No one spoke out of turn. No one
sought a super star status for himself.
Apparently both C. Rangarajan and Bimal Jalan harbored political
ambitions, but not at the expense of the institution. They did not charm the
media personnel or global investors to canvass support for them.
Insofar as the commentary of opposition leaders, Bollywood
sundries, et. al. is concerned. I truly find it frustrating.
P. Chidambaram and Rahul Gandhi clamoring for Rajan is the most
ridiculous sight I have seen in years. These are the people who denied second
term to APJ Abdul Kalam and preferred a totally uninspiring Ms. Pratibha Patil
over him. He was one man who was unarguably admired by 125cr Indians (except
perhaps the Gandhi family) and all world leaders. If that was not wrong how
this is wrong?
Please note that I have nothing against Dr. Rajan. I totally
disagree with Mr. Swamy in casting doubts over his competence, integrity and
patriotism.
But I feel, the way he has conducted himself in undermining the
superiority of the RBI as an institution leaves much to desire. If PM and FM
were wrong in not supporting him openly when Dr. Swamy attacked him, he is also
wrong in not telling El-Erians of the world that RBI is a strong autonomous
institution with a robust policy framework, and one person matters nothing to
this. (Though he said something to this effect on Sunday, it was too feeble and
insufficient, in my view.)
People who doubt RBI autonomy may explore the archives and read
what the analysts said after each policy statement of Y. V. Reddy and D.
Subbarao. These two governors were reportedly consistently at war with the
respective finance ministers on rates, but did never succumb.
Last but not the least, if the monetary efforts of the RBI under
governor Rajan were not duly complemented by the fiscal efforts of the
government (risking its political career and perhaps some elections) the
results might not have been as good as they look today.
Restrictions on gold imports and gold monetization scheme
(annoying their core constituency of traders), not passing over the full
advantage of the fall in crude oil prices to consumers by hiking duties
(bearing the wrath of opposition in and outside the parliament), saving
subsidies on LPG etc., attacking wholeheartedly on generation and deployment of
black money through administrative and legislative measures etc. (annoying
businesses and traders and even compromising on growth), taking government
patronage off the willful defaulters, liberalizing FDI rules (to the annoyance
of RSS and other affiliates) etc. are just some of the efforts that have
strengthened the Indian macro position.
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