No country for Bond: Did Raghuram Rajan’s candid, no-holds-barred approach finally cost him his job?


An outspoken RBI Governor is rarity but Raghuram Rajan is the one who famously declared in James Bond style — ‘My name is Rajan and I do what I do’ and he had a candid view on all topical issues economic and political.

Keeping up this reputation, Rajan today himself decided to put at rest all speculation about his continuance by saying no to a second term “on due reflection, and after consultation with the government”, but also made it clear he was “open to seeing” through his unfinished work on containing inflation and cleaning up the books of banks.

Be it speaking for tolerance after a Muslim was lynched for allegedly eating beef, comparing the Indian economy with ‘a one-eyed king in a blind world’ when strong growth was the central narrative, questioning the flagship programmes or doubting the new GDP numbers, Rajan was often vocal and not in sync with what the government would have liked it to be.

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On the lines of Brexit — used for the upcoming vote on whether Britain would remain in Europe or not — the speculation over Rajan’s continuance had already prompted a new term ‘Rexit’.

When BJP’s newly-nominated Rajya Sabha MP Subramanian Swamy questioned whether Rajan was “mentally fully Indian” as part of his tirade against the RBI Governor, the former IMF Chief Economist said he would not reply to “ad hominem attacks” and give legitimacy to “so fundamentally wrong and baseless” allegations.

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On his “Indian-ness” being questioned for holding a US green card, Rajan said, “Indian-ness, love for your country is complicated. For every person there is a different way that you show respect for your country… My mother-in-law will say karmayogi is the way to go — do your work.” In his three-year stint at the central bank, the vocal Rajan has regularly given candid speeches and often chose his favourite ground of ideas– academic institutions –for speaking his mind on key issues.

He chose his alma mater IIT-Delhi to make a passionate plea in support of tolerance following the brutal the lynching of an elderly Muslim in nearby Dadri over allegedly eating beef, saying tolerance and mutual respect are necessary to improve an environment for ideas and physical harm or verbal contempt for any particular group should not be allowed.

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On a day when the RBI signed the all-important monetary policy agreement with the government, Rajan had invoked Hitler’s regime to drive home the point that strong governments will not always drive move in the right direction.

While stating that a strong government should be led by those who have expertise, motivation and integrity and can provide the needed public good, Rajan warned at the lecture in Goa that “strong governments, may not, however, move in the right direction”. At the same time, his hard stand on cleaning up the books of banks and his reluctance to focus more on containing inflation rather than lowering interest rates created many heartburns.

Asked once by a student why the humble Dosa — the South Indian dish — continued to cost high when RBI was claiming a victory over inflation, Rajan blamed it on lack of technology upgrades from its traditional Tawa preparation and high wages of the person making it.

Among his first speeches after being appointed by the previous UPA government in the middle of an economic crisis, Rajan expressed reservations over the export-led focus of the ‘Make in India’ programme of the Modi government.

Rajan, who was often called a rockstar central banker and had rightly predicted the 2008 global financial crisis, opined the world is unlikely to accommodate another country like China, and that we should rather focus on domestic consumption or make for India.

Rajan went public with a critique of the new GDP calculation method as well, which overnight made the country as the fastest growing major economy with a 7.6 per cent growth as against the low 5 per cent when the NDA government took over.

“There are problems with the way we count GDP which is why we need to be careful sometimes just talking about growth,” Rajan told the students of the RBI-promoted Indira Gandhi Institute of Development Research here this January.

But the most contentious of the comments was one comparing the state of our economy with a one eyed king in the land of the blind, which was described by some Union ministers.

In the face of the wild criticism, Rajan stood by the statement and apologised only to the visually challenged community, if they were hurt by the remarks and pointed out that we are still a poor economy that is home to the largest number of the poor on the planet.

Under attack from various quarters over his ‘one-eyed is king’ remark, Rajan called for raising the level of public dialogue and said people should not look for “insults” everywhere.

“I think we all have to work to improve public dialogue.

Speakers have to be more careful with words and not be gratuitously offensive. At the same time, listeners should not look for insults everywhere, and should place words in context so as to understand the intent,” he said.

He also invoked Mahatma Gandhi, saying his famous quote — an eye for an eye will only make the whole world go blind — was also not meant to demean a handicap.

“If we spend all our time watching our words and using inoffensive language or hedging everything with caveats, we will be dull and will not be able to communicate because no one will listen,” Rajan said. “If we are to have a reasonable public dialogue, everyone should read words in their context, not stripped of it,” he said, even as he called it a “forlorn hope”. Known for his frank views, the academic-turned-central banker said there is a need for “respect and tolerance” for effective communication and debate, rather than “angry exchanges that we see on some TV shows”.

He further said, “More generally, every word or phrase a public figure speaks is intensely wrung for meaning. When words are hung to dry out of context, as in a newspaper headline, it then becomes fair game for anyone who wants to fill in meaning to create mischief.”

Rajan assumed charge as the 23rd Governor of the Reserve Bank of India on September 4, 2013 and currently is on leave from the University of Chicago, where he is the Distinguished Service Professor of Finance at the Booth School.

Between 2003 and 2006, he was the Chief Economist and Director of Research at the International Monetary Fund. As per his profile with the Chicago Booth School, Rajan’s research interests are in banking, corporate finance, and economic development, especially the role finance plays in it. He co-authored Saving Capitalism from the Capitalists with Luigi Zingales in 2003. In a recent article, Zingales said Rajan was being attacked for “fighting the inefficiency of the banking system” and for taking on the crony capitalists in the country.

Zingales further said the governorship earlier used to be “entrusted to grey bureaucrats that left no impact”. “Rajan, however, is the dream of the new India: young, competent, and reached the top of the Indian central bank because of his skill, not because of his political alignment,” he wrote.Zingales, who is also Professor of Finance at the same school, said a central banker would have a “guaranteed re-confirmation” in any country in the world after managing to reduce “inflation from 11 per cent to 5 per cent while simultaneously enabling an increase in growth from 5 per cent to 8 per cent in just three years”.

He then wrote Fault Lines: How Hidden Fractures Still Threaten the World Economy, for which he was awarded the Financial Times-Goldman Sachs prize for best business book in 2010. Rajan is also a member of the ‘Group of Thirty’ and was the President of the American Finance Association in 2011 and is a member of the American Academy of Arts and Sciences. While it has been often alleged that this Group of 30 was set up to defend the US dominant position in the global economy and to serve the interests of international finance, Zingales said it was Rajan, who in 2005, in front of an enraged Alan Greenspan (then outgoing Chairman of Federal Reserve), denounced the potentially destabilising effects of financial derivatives.

Pondering over the reasons behind “such anger” targetted at Rajan back in India, Zingales said the RBI Governor “is fighting not only inflation, but also the inefficiency of the banking system, burdened by bad loans”.

In January 2003, the American Finance Association awarded Rajan the inaugural Fischer Black Prize for the best finance researcher under the age of 40. The other awards he has received include the global Indian of the year award from Nasscom in 2011, the Infosys prize for the Economic Sciences in 2012, and the Center for Financial Studies-Deutsche Bank Prize for Financial Economics in 2013.