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Who's Afraid Of Raghuram Rajan?

21/06/2016 8:29 AM IST | Updated 15/07/2016 8:27 AM IST
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Raghuram Rajan, governor of the Reserve Bank of India (RBI), reacts during a Bloomberg Television interview at the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, Jan. 21, 2016. World leaders, influential executives, bankers and policy makers attend the 46th annual meeting of the World Economic Forum in Davos from Jan. 20 - 23. Photographer: Simon Dawson/Bloomberg via Getty Images

Once upon a time, there was a great manager in a great organization who did wonderfully well. He was there on the basis of his competence and past track record. He had many great predictions to his credit and was a person respected for his knowledge of his subject.

His boss, though, was a typical Type A personality. He had a rags-to-riches progression to the top of the corporation, unhindered by his lack of education and propelled by his amazing statecraft. Unfortunately, this man could not bear the idea of an individual a thousand times more intelligent than him reporting to him.

Now, this manager had the confidence to call spade a spade, could take great actions in the interest of the corporation, was loved by all the customers and vendors and also by all his colleagues. But all of this irked the boss, whose hubris verged on the delusional. He could not tolerate being looked in the eye and challenged by his unwaveringly rational subordinate.

The manager quit. The boss was happy. The corporation suffered. And it was business as usual.

Versions of this story play out in corporations the world over, but if you still haven't figured out the specific people I'm writing about at the expense of my Sunday afternoon glass of Chardonnay you might as well switch tabs.

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I was having an idyllic drink with my dear friend Sundeep Sahni on Sunday, 12 June, and were discussing the usual: Brexit, Raghuram Rajan's term, the state of the economy and the stress in the global markets that's still hidden from the eye of the common man. Sundeep was so sure that Rajan would get a second term, arguing:

• Rajan is too good and intelligent a guy to be consumed by petty politics.

• India needs him.

• He has brought in fiscal discipline.

• He has exposed crony capitalism.

• Forex reserves are at a lifetime high under his stewardship.

• India's respect as a meritocracy-driven nation is at a high in the international finance and business community.

• And he can call spade a spade.

I begged to disagree. My argument was limited to one thing:

• Calling spade a spade is the biggest problem.

Modi would have never allowed Rajan to stay on and neither would Rajan have wanted to. It has all been so evident in the last two months.

Yesterday, Sundeep called me and said, "My god, you were right!"

Modi would have never allowed Rajan to stay on and neither would Rajan have wanted to. It has all been so evident in the last two months.

Anyone reading this piece is educated enough to realize and acknowledge that...

• Subramanian Swamy lacks the guts to raise an issue without tacit permission from the top. He is the government's drama master.

• When the contents of our deep freezers have to be ratified by the religious zealots of the establishment, how could a man be allowed to take decisions on the interest rates and fiscal policies of the nation (no matter how good and beneficial they were)?

• Rajan created a system that exposed the severe fault lines in the banking system. A system that was used, it is believed, to siphon off more than $100 billion.

It's a shame that Mallya is being persecuted with such zeal for defaulting on a billion dollars in business losses. After all, everyone took a risk -- the businessman and the lender as well. No one has raised a question on the massive debts that are lurking in the banking system. And this is what we know of. Mallya's only real fault: he kept strutting around and getting photographed with arm candy while Kingfisher employees were in dire straits.

Mallya ran a loss-making airline and banks kept funding it without adequate underlying security/collateral. Why the fuss now if he isn't able to repay?

Try raising a small loan from a nationalized bank. They would want collateral for collateral. There is no way in hell that you would be able to default.

And Mallya's Kingfisher brand was taken in as collateral to the tune of almost half a billion dollars by the State Bank Of India. Did they dream of rechristening it to Kingfisher Bank of India in case Mallya defaulted, or did they plan to co-brand Kingfisher with SBI on T-shirts and souvenirs and turn it into a multi-billion dollar enterprise?

Why would Rajan have sacrificed the comfort and respect of being a top world-class academic for the corruption-stained corridors of power in the North Block?

A guy like Rajan was dangerous. Utterly dangerous to this caucus. And he had to be removed.

So a nationwide drama was created to embarrass him and raise questions on his integrity and his patriotism. Swamy went as far as to call him an agent of American corporations or the CIA!

Any self-respecting, educated expert on his subject doesn't have time for all this bullshit. He or she knows that the corrupt system doesn't deserve him/her.

Rajan was no different.

He could see that the world is on the precipice of a serious financial meltdown. I have repeatedly said in my previous pieces that 1929 or 2008 would look like a walk in the park. When that happens and when the big bubble will burst no one knows. It could be six months or six years. But whenever it happens it will be far more painful than September 2008

Obviously, Rajan wanted to leave on a high. He did what he did and did it beautifully. Only people with innate knowledge of economics would agree that controlling inflation by a few hundred basis points is far more important than a few hundred basis points of growth in GDP. And he did get a grip on inflation.

Rajan could foresee that the rupee's sharp decline is just around the corner and the cascading effect of global issues on the Indian canvas of finance, growth and banking would have been huge and seriously difficult to manage.

If Chetan Chauhan can be the boss of NIFT, the next RBI governor could well be Mohan Bhagwat.

And in the face of such degenerate pettiness by the so-called patriots, why would Rajan have sacrificed the comfort and respect of being a top world-class academic for the corruption-stained corridors of power in the North Block?

With Rajan gone, let's see India achieve 10% growth in GDP and a strong rupee.

If Chetan Chauhan can be the boss of NIFT the next RBI governor could well be Mohan Bhagwat.

And I thought banana republic was only an apparel brand.

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