Raghuram Govind Rajan is a doyen of economy with a string of professional successes to his name. He is the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business, he was the Chief Economist at the IMF from 2003 to 2006 and notably the 23rd Governor of the Reserve Bank of India from 2013 to 2016. Therefore, his comments on the Indian economy do carry a significant amount of weight.
Nevertheless, his remarks expressed while delivering the O.P. Jindal lecture at Watson Institute, Brown University, on 9 October, come across as a mumbo-jumbo incantation of political rhetoric and ideological repartee with some financial wisdom thrown in all with a negative connotation.
His opinions about demonetisation and GST as being “ill-conceived” and “poorly executed” respectively fall within the realm of economic analysis and can be debated. That “India has slowed considerably from the go-go years before the financial crisis, but even from the 9% growth in the first quarter of 2016” is undeniable and so are his conclusions about a concerning fiscal deficit. And his criticism of the government for pushing welfare reforms is in principle an acceptable economic caveat.
However, what makes his speech overall unpalatable is his detour into topics relatively remote from economics and his attempt to link them via exaggerated and implausible extrapolations. Moreover, his talk proves to be a fault-finding project instead of being an economic panacea; no concrete solutions are offered.
To begin with, his doomsday prophecy that majoritarianism is taking Indian down “a dark and uncertain path” has no place in an economic dialogue. His terming of Kashmir and triple talaq as majoritarian issues is to stretch the boundaries of logic.
Likewise, his references to authoritarianism are puzzling. He avers: “Because of the weakness of institutions every government runs the risk of turning authoritarian. This was true about Indira Gandhi after 1971 as it is true of the Modi government in 2019.”
The context is ambiguous and his assertion arguable. China and Singapore are authoritarian states but examples of shining economic success which belies the theory that the system of governance has a direct impact on economic trajectory. Such flawed theories when transposed with economic homilies makes the latter shaky.
Commenting on the government’s anti-corruption emphasis, Rajan states “Ministers are disempowered… The bureaucracy’s effectiveness has been diminished because in parallel India is running a campaign against corruption in the past. For a bureaucrat there is no significant upside to taking action if he can be subject to vigilant (sic) inquiry by the next administration,”
So is Mr Rajan suggesting that we allow rampant corruption to prevail with no checks and balances similar to the Manmohan Singh period when corruption was the norm resulting in a record number of ministers being involved in corruption scandals? The answer is self-evident.
Next he applies a warped logic to find fault with tax department raids. He says: “Why evaders are problematic only in opposition and not in members of the opposition who pledge allegiance to the ruling parties is unclear.’
Selective targeting is definitely not acceptable and needs to be condemned but it cannot be used as valid defence by a person rightly indicted. It is akin to arguing before a policeman that he/she must not be fined for a traffic violation because there are hundreds of others getting away with it.
Economic principles and political tenets are poles apart. Excellence in one field and the visibility garnered by the same does not automatically catapult one to the status of a political pundit or an ideological scholar. Specialty experts if they wish to be credible must exhibit prudent caution when venturing into unfamiliar territory.
To cloud an economic lecture with political rhetoric and ideological demagoguery dilutes the message making it suspect. Mr Rajan would have been better off sticking to the proposition of the lecture.
With the Nobel Prize in economics for 2019 being awarded to Abhijit Banerjee, the list of world-renowned Indian or Indian origin economists has only grown longer: Amartya Sen, Kaushik Basu, Jagdish Bhagwati and Arvind Panagariya to name a few others.
What I would like to see these noted economists do is to set aside their political and ideological biases, come together in a non-partisan manner to formulate an effective road map to guide India through these challenging economic times. That would be the best use of their talent in the service of the nation.