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'As a manager, Rajan hasn't been very good for the RBI'

By T C A Srinivasa Raghavan
Last updated on: June 18, 2016 20:53 IST
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'From where prime ministers sit, it makes no difference at all who occupies the governor's post.'
'Literally anyone with a decent education or work experience can be appointed to the job, which is basically a managerial one with little room for manoeuvre,' says T C A Srinivasa-Raghavan.

 

Reserve Bank of India Raghuram Rajan

 

For the last several weeks a controversy has been generated over whether or not the present governor of the Reserve Bank of India, Raghuram Rajan, should be given an extension. His current term ends on September 4.

There is no logical reason for denying him an extension. All governors since 1992 have served for five years.

Besides, he is a globally known business economist. He has a pleasant manner as well. He is also good-looking, a fact that has been duly noted by ladies who write.

But many others think he should not get an extension and the issue is being debated by economists, politicians and journalists as if it matters who the governor is. It doesn't.

Such are the passions Rajan generates that even Prime Minister Narendra Modi has been obliged to intervene. These are bureaucratic decisions, he told a journalist from a well-known business paper in America.

And that view summed it up because from where prime ministers sit, it makes no difference at all who occupies the governor's post.

Literally anyone with a decent education or work experience can be appointed to the job, which is basically a managerial one with little room for manoeuvre. As a manager, Rajan hasn't been very good for the RBI.

The power to manage is vested in the office; the glory in doing so -- at the margin -- is bestowed by a besotted media. It always ignores housekeeping issues.

The rude truth

As with any highly credible institution it is the institution that bestows greatness on the person who heads it. There have been only two exceptions to this general rule: The Election Commission under T N Seshan and the Comptroller and Auditor General under Vinod Rai.

But for the last 15 years or so, the RBI, taken in by the silly media hype, has been pretending that its governors are somehow Brahma, Vishnu and Shiva combined. It has achieved this by treating all its past governors -- bar three, two of them were temps -- as the nation's pride, government's envy.

But here's the depressing truth: Ever since the RBI was set up in 1935, there has not been a single governor who was a 'giant' -- as the central bank likes to call them. In fact, at the time of their appointment, all formers governors had a certain stature because most of them had been civil servants and the civil service, alas, tolerates no giants.

Anyone could have been -- and indeed was, once or twice -- appointed to the job and would have performed just as well as anyone else because the highly professional staff of the RBI holds the governors up.

The staff does the work, the governor gets the credit for tinkering ever so slightly with the interest rate every now and then.

And you may have noticed how no governor ever says 'we'; it is always 'I'.

Rajan's reign

Rajan is an exception to the rule. He came as a smallish giant, and some people pretended he was a big giant. This speaks volumes about his networking and communication skills.

His academic accomplishments, however -- by common consent in the economics fraternity -- fall somewhere in the B++ or A- category.

He is not the first economist to hold the job. There have been four others before him. But even they -- I G Patel, Manmohan Singh, C Rangarajan and Bimal Jalan -- had been employed by the government for a long time before they got the job. (Such was the political footwork of one of them that an envious IAS guy called him the best IAS officer the country had ever seen.)

There was no particular professional reason for giving them the job; it was just that the prime minister trusted them or, as was more often the case, didn't care who the governor was so long as the finance minister was okay with him.

Professionally, they were known only within a small group of economists and bureaucrats and, if I recall rightly, not held in any great awe. Indeed, all of them -- Patel included -- were better bureaucrats than economists.

What all these economists learnt while they were in government was that what the Lord giveth, the Lord can also taketh away.

As governors, they grumbled, but they never defied. How can you defy the prime minister if he summons you to tell you to do this or that?

Rajan, in contrast, is the first governor to have come from outside the government/RBI system. His brief stint as chief economic advisor was for cosmetic purposes only.

After four years of working in the system, he surely knows the score, which was stated best by Y V Reddy: A governor is completely independent -- within the limits set by the government.

This column was written before Dr Rajan informed the Reserve Bank of India staff that he will return to academics after his term ends.

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T C A Srinivasa Raghavan
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