Reserve Bank Governor Raghuram Rajan claims that he seeks to dampen “inflationary expectations” in the country, whatever that might mean. To an individual, who for all his adult life has been far away from meaningful contact with the everyday reality of life in India, what gets accepted as “fact” are the products of the imaginations of research assistants eager to demonstrate their skill in Power Point presentations. Under Palaniappan Chidambaram and Raghuram Rajan, the Ministry of Finance and the RBI have become laboratories for theories cooked up in US university labs to get experimented with in India. A side effect has been that both Chidambaram and Rajan have been very deferential to those actually responsible for higher and higher prices in India. These are the handful of individuals and institutions which indulge in hugely profitable (to themselves) speculation in both the Indian rupee as well as in commodities, including food grain. To call such individuals gamblers would be to insult that arcane occupation, for the reality is that the cartels behind the short selling and forward trading of the rupee as well as commodities have close links with SEBI, RBI, the Ministry of Agriculture and the Ministry of Finance. Hence they operate on a “perfect knowledge” basis, making it inevitable that the rupee falls (as it did till the BJP secured a majority in the Lok Sabha on 16 May, thereby bringing the promise of change) and commodity prices rise, both to levels very different from that dictated by fundamentals.
It is testimony to Raghuram Rajan’s contempt for the Indian people that he poses as an inflation fighter, while at the same time ignoring, when not actively facilitating, the kinds of speculation which would earn a jail term or a hefty fine in the United States, the country whose financial entities he seems determined to cosset. The very entities that have had billions of dollars of fines imposed on them in the UK and in the US have a red carpet welcome in the portals of economic governance in India, not to mention their hold on this country’s clutch of “pink journalists”, many of whom act as facilitators for the massive and one-way speculation (always the economy loses while the speculators and their backers in government gain) that has been the primary cause of the raging inflation in India. In 1992-96, it was Finance Minister Manmohan Singh and his foreigner-friendly but India-unfriendly tax policies which caused the downfall of the Congress party. In UPA II, much of the blame for that formation’s execrable showing in the 2014 elections will go to Palaniappan Chidambaram and Sharad Pawar, who have presided over an administrative machine which ensured that speculators receive windfall profits while the consumer suffer.
Manmohan Singh has been deferential to speculators (and who can blame him, as this gets indulged in by the very foreign financial entities who have fawned over him for two decades). An example is the way in which the Intelligence Bureau was forced last year to discontinue its monthly review on specific instances of manipulation of shares as well as commodity prices by identified parties.
The reports, which hopefully have not been destroyed now that an honest Prime Minister is taking charge in South Block, detail numerous instances of insider trading in company shares. Often, such trades get done in collusion with selected economic journalists, whose job it is to write reports that will either boost or depress prices of selected shares. Although these reports were shown to Prime Minister Manmohan Singh, Finance Minister Palaniappan Chidambaram and Home Minister Sushilkumar Shinde, each of them ignored the IB reports since they were first submitted in 2007, rather than taking action on the individuals identified by the IB as insider traders, share price fixers and commodity speculators acting on information illegally received from official channels. Unless speculation is halted and insider information made toxic, the way it is in the US, prices will continue to gallop in India.
The new PM will need an iron broom to get rid of the dirt that has accumulated in significant portals of government since the somnolent Manmohan Singh took over the title of Prime Minister in 2004.