No better choice than Rajan
What is the role of a ruling government, after all? Aren’t the elected group of politicians in any democratic nation supposed to ensure that there is continual social, economic and cultural uplifting of citizens through dynamic, focused and objective oriented policies and measures? If you agree to this, then you would also agree that on each and every such aspect, Indian politicians have had minimal and insignificant contributions, if not nil.
The 2013 World Bank report on poverty (The State of the Poor: Where are the Poor and Where are the Poorest?) shows that while the number of people living in extreme poverty globally has come down considerably over the past many decades, India now shamefully boasts of a higher percentage of the world’s poorest people as compared to three decades ago. As per the study, 33 per cent of the world’s poorest people live in India, a shocking figure of 400 million plus. In effect, Indian politicians per se have shown the world benchmarks of what never should be done while leading a nation.
Compared to these ignominious political examples, there are still stalwarts in our bureaucratic system, who single-handedly are attempting – and in many cases succeeding – to change the outlook of India. Around three months ago, I had written about one such person, Raghuram Rajan, who I said was potentially great news for the Indian economy. I had also written then that Rajan’s ‘academic understanding of how free markets are beneficial, the important and visible role of governments in such free markets, and his scathing attitude towards how the same governments are subject to being influenced by big private players,’ was what made Rajan a nemesis of crony capitalists. With each passing day, I feel convinced that if India perhaps had to hand over the reins of our economy to any person, there’s no better a choice than Rajan.
Rajan took over as the Governor of RBI in September 2013. Look at how his focused efforts in the past eight months have reaped benefits in such a short span of time. The inflation rate for FY 2012-2013 was 10.2 per cent. The same for FY 2013-2014 has come down to 9.5 per cent. In March 2014, the rate had come down to 8.31 per cent. The wholesale price index (WPI) inflation is now at sub five per cent rates. It’s taken Rajan just around three quarters of a year to do what the government could not do in the past so many years. In August/September 2013, the rupee was at its historical lowest and our foreign exchange reserves had crumbled to a three year low. Rajan’s brilliant policies ensured that not only did the rupee gain back the lost sheen (Bloomberg says that the rupee since August 2013 has had the biggest gain amongst the 78 global rates that they track), our forex reserves have also grown by more than 10 per cent (a huge amount when seen in context) to cross the figure of $300 billion last month. Rajan managed to curtail the current account deficit for FY 2013-2014 to around $35 billion, compared to $88 billion last year. As per various reports, the merchandise trade deficit for FY 2013-2014 is 25 per cent lower than that of the previous year. Our GDP growth rate, which had touched the nadir of four per cent, is creeping up each month. Rajan confidently stated this month that it would cross five per cent very soon. IMF supports this contention, forecasting that India’s GDP growth would cross six per cent in 2015. Around 68 per cent of CFOs (Chief Financial Officers) interviewed by Deloitte recently reposed confidence in the Indian economy, compared to only 44 per cent last year. Truly, such large improvements in economic indicators in such a short span of time are almost close to legendary. Analysts globally are praising Raghuram Rajan for these improvements.
It is rare for a bureaucrat to be praised by both the ruling government and the opposition – Raghuram Rajan is one of the very few to have such a utopian position. From BJP to Congress, the across board support for his intellect, sincerity and dedication is ever present. To a situation now that leaders like HDFC Chairman Deepak Parekh go as far as to say that ‘replacing the RBI governor Raghuram Rajan may lead to a sovereign rating downgrade.’
One famous statement of Raghuram Rajan stands out in my mind, ‘There is no reason that India’s growth cannot regain double digits. Simply moving our millions from low productivity agriculture to rural industry or services will give us growth for years to come, provided we are willing to do the minimum necessary to collect the low hanging fruit.’ One wonders why there is no politician who can confidently stake his claim to such objectives. No prizes for guessing why no one hears about the Minister of Finance anymore. Without doubt, today the Indian economy is being led single-handedly by Raghuram Rajan – and if he’s the only person with the wherewithal and gumption to lead India, then why in heavens do we need politicians at all?
The author is a management guru and director of IIPM Think tank