There is an old Chinese Proverb “Do not insult the crocodile until you’ve crossed the river”.
Raghuram Rajan, the suave Cambridge educated Governor of the RBI, would have done well to pay attention to this sage advice. Instead, he went out of his way to taunt NAMO and the Government.
First, Rajan turned a deaf ear to the several entreaties of Arun Jaitley, the Finance Minister, that interest rates have to be reduced drastically in order to boost the economy. Instead, he defiantly said “My name is Raghuram Rajan and I do what I do” implying that he has no concern with what the Government desires. The situation became somewhat comical because it implied that the Finance Ministry is a mere spectator and has no role to play in these important fiscal issues.
Second, Rajan taunted NAMO by calling his government a “One-eyed King in the land of blind”. This was like a red flag to NAMO’s bhakts who cannot tolerate even the opposition taunting NAMO let alone someone appointed by him. All three heavy-weights in NAMO’s cabinet, Arun Jaitley, Jayant Sinha and Nirmala Sitharaman, took strong exception to Rajan’s choice of words.
“We are the shining star. I don’t agree with what the governor said.” Jayant Sinha said testily. “I may not be happy with Rajan’s choice of words” Sitharaman fumed.
Then, Rajan tied himself in knots trying to explain the “context” of his statement. He also apologized to the visually handicapped citizens for his “insensitive” remark.
Third, not having learnt his lesson, Rajan again attacked NAMO by claiming that the ‘Licence Raj‘ had gone but the ‘Inspector Raj‘ remained, cocking a snook at NAMO’s claim that he had eased the norms of doing business.
Fourth, Rajan demanded that the “RBI should be allowed to take its own decision” implying that NAMO, Jaitley and Sinha are breathing down his neck and not allowing him to function independently.
Fifth, Rajan appears to be enamoured by the idea of “Islamic Banking” or “interest-free banking” even though his predecessor D. Subbarao had debunked the idea as impractical. This has understandably raised the hackles of the Hindutva brigade.
Nirmala Sitharaman, the Minister of Commerce and Industry, appears to have reached the end of her tether. She openly hit out at Raghuram Rajan’s monetary policies and claimed that high interest rates are impacting industry and small businesses.
“Rajan’s policies need to be revisited” Sitharaman said in a chilling tone.
In these circumstances, there are no prizes for guessing that Raghuram Rajan’s days as RBI Governor are numbered.
Subramanian Swamy, NAMO’s confidante, enjoys a formidable reputation as a ‘giant killer’. He is known for his fearless and relentless pursuit of NAMO’s enemies.
Swamy’s latest brief is to cut Rajan to size and to bring him to his knees.
Swamy has been relentlessly attacking Rajan. His latest salvo is to file a charge sheet of six grave accusations demanding that Rajan be fired immediately from his job.
Swamy is particularly irked by Rajan’s alleged loose cannon statements:
“Despite being a government official he has been publicly disparaging of the BJP government. For example he has by innuendos in effect held our government responsible for the “climate of intolerance” in the country. In a Washington Meet recently he disparaged the growth rate of India as being equal to a cockeyed person in the land of blind persons. Such pejorative sarcasm against the Government is a violation of the Rules governing public officials and conduct unbecoming of such an official.”
Swamy also alleged that Rajan’s policies are “anti-national in intent” and that he has acted in “reckless disregard of the national security interests”.
— TIMES NOW (@TimesNow) May 26, 2016
Swamy also alleged that Rajan does not “have a clue on how to technically determine monetary policy or interest rates”.
? https://t.co/Fa1nZw9Yr6 –Media Morons: Does R3 have a clue on how to technically determine monetary policy or interest rates
— Subramanian Swamy (@Swamy39) May 27, 2016
Swamy’s fierce attack has met with support from other firebrand supporters of NAMO. S. Gurumurthy, the Chartered Accountant turned crusader who is also reputed for his fearless fighting abilities, endorsed Swamy’s demand for Rajan’s ouster:
Endorse Dr Swamy. Nothing personal against Rajan. Only point is he knows very little re India. He's Global Indian https://t.co/ATAxFrpg2N
— S Gurumurthy (@sgurumurthy) May 27, 2016
Minhaz Merchant, a well-known author and editor, conducted a poll amongst his twitter followers on whether Raghuram Rajan should get a second term or not. He reported that 72% were opposed to the idea of Rajan getting a second term:
Should RBI governor Raghuram Rajan get a second term?
— Minhaz Merchant (@minhazmerchant) May 23, 2016
However, many in the intelligentsia are not impressed by Swamy’s charge sheet against Rajan.
Samir Arora, the whiz-kid fund manager of Helios Capital, made it clear where his loyalties lie:
Names of other potential candidates for RBI guv should not even be included in the same sentence with Raghuram Rajan. RGR is class apart.
— Samir Arora (@Iamsamirarora) May 19, 2016
Marc Faber, the renowned stock market Guru called Rajan the “best central banker in world today”:
Marc Faber Excl:RBI Gov Rajan,best central banker in world today" Perhaps not popular as doesn't believe in printing money @_anujsinghal
— Shereen Bhan (@ShereenBhan) May 18, 2016
Sunil Jain, the Editor of Financial Express, called Swamy’s diatribe a “lunatic idea” and “nonsensical objections”.
Any lunatic idea that's 'news' gets wide press,the loonier the better.Decided 2 spare FE readers @Swamy39 nonsensical objections 2 RBI Rajan
— Sunil Jain (@thesuniljain) May 17, 2016
Vishal Dadlani, the entertainer, also came out in support of Rajan with a pithy cartoon:
Hey, Barmy Subbu Swamy with your idiot-army….This is for you. pic.twitter.com/fi4fp1mIEu
— VISHAL DADLANI (@VishalDadlani) May 18, 2016
Business Standard compiled a list of international investors who are happy with Raghuram Rajan:
— Business Standard (@bsindia) May 26, 2016
Ace investor PN Vijay, who is also a NAMO supporter, appeared to be in Rajan’s camp, though his tweet is cryptic:
Swamy finds fault with Rajan using his Chicago ID. But how come many Government staff in sensitive positions use Gmail, Yahoo in their work?
— P.N.VIJAY (@pnvijay) May 22, 2016
Arvind Kejriwal, the maverick leader of AAP and Chief Minister of Delhi, used the opportunity to take a dig at NAMO:
Thro Swamy's utterances, is Modi Govt preparing ground to throw out RBI guv? Sad how each institution being attacked https://t.co/uuUqqUcT4Z
— Arvind Kejriwal (@ArvindKejriwal) May 18, 2016
Some international observers are not taking kindly to the fracas between Swamy and Rajan. Bloomberg expressed concern that Swamy is “The Trump of India” and a “risk to the reforms process”.
The Free Press Journal warned that the “Attack on Rajan sends all the wrong signals“. It pointed out that “the argument of Swamy willy-nilly becomes (if it is not already) the argument of the BJP“. It also claimed that if Swamy’s demand for a loosening of interest rates is accepted, there will be catastrophic consequences on inflation.
Now, this sorry state of affairs has put novice investors like you and me in a confused state of mind. On the one hand, if Rajan is replaced by a pliant Governor, the first thing that the new Governor will do is to slash interest rates. This will send all stocks surging, especially the Banking, NBFC, Realty and Auto stocks. However, some claim that such lowering of interest rates will send inflation rocketing and that there will be draconian consequences for the economy. So, a short-term benefit by way of an aggressive lowering of interest rates could turn into a long-term disadvantage for the entire economy!