New Delhi: The Indian economy has become too big to be run from the Prime Minister’s Office (PMO), former Reserve Bank of India (RBI) governor Raghuram Rajan has said in criticism of the concentration of power in the Narendra Modi government.
“India has become too big an economy to be run from the top. And unfortunately the experience so far is that it simply doesn’t work,” Rajan said.
The former RBI governor made the comments Friday while delivering the second of the two-part OP Jindal lecture on the Indian economy at the Watson Institute of International and Public Affairs, Brown University, US.
“This government is extremely centralised which puts a lot of pressure on the leadership. The leadership doesn’t have a consistent and articulated vision on how to achieve economic growth,” he said.
There is much more centralisation of power not only in the central government but within it in the PMO, added Rajan.
“Today what we have is a PMO which essentially works through the bureaucracy. The ministerial level is often bypassed. Ministers are disempowered for the most part,” he said, adding that civil servants are typically unwilling to take decisions on their own and don’t have strong ideas for reforms.
The former central bank governor added the Modi government has a strong political vision, but there is no clarity on the economic vision.
“There is a lot of uncertainty about the overall economic vision at the top. Maybe there is a vision that is coherent but we don’t know about and there is mixed follow through below,” he said, highlighting the limited capacity of the PMO.
Rajan’s comments come at a time when growth in the Indian economy has slowed to a six-year low of 5 per cent in the June quarter of 2019-20 and full-year growth is expected to be only around 6 per cent.
Also read: Raghuram Rajan says India losing its economic way, fiscal deficit ‘conceals’ a lot
On majoritarianism
In his speech, Raghuram Rajan criticised the “divisive populist majoritarianism” of the Modi government over issues ranging from scrapping of Article 370 in Jammu and Kashmir to targeting of opposition leaders with the help of investigative and tax agencies, and of former civil servants for past decisions.
He said majoritarianism may win elections for a while but it is taking “India down a dark and uncertain path”.
Rajan also warned that India risks following the Latin American countries by using populist spending to “buy legitimacy for authoritarian governments”.
India needs to strengthen its democracy and institutions rather than giving into the allure of authoritarianism, he added, pitching for depoliticising appointments to important institutions like the Supreme Court, investigative bodies and even educational institution posts.
On banking
The Modi government may have reiterated that banks are free to take their own lending decisions based on commercial reasons, but it has imposed mandates on them to further its political gains, Raghuram Rajan said during the lecture.
After assuming office in 2014, the Modi government had promised that bankers would be free to take commercial decisions and there wouldn’t be phone calls from New Delhi asking them to lend to certain big borrowers.
However, the former RBI governor said new programmes imposed on banks, like Mudra where each branch is given a target for giving loans under the scheme, force them to move away from commercial principles of lending.
“It’s not lending to my friend but lending to a constituency that I like or lending to the political affiliations that I like. That becomes problematic because those loans to the small and medium sector are now in trouble. That is why RBI is now exercising forebearance over them,” he said.
However, the problem of exercising forebearance is that it doesn’t reduce the number of bad loans but almost always increases it, he added.
“We are going to even less commercial principles… We are going to the era of loan melas,” Rajan said, in a reference to an outreach programme of Union Finance Minister Nirmala Sitharaman.
Also read: India’s top bankers keep saying the worst is over, but it only keeps getting worse
Growth rate of Indian economy is declining even before 2014, it is because of fall in GDS, GDI, Human Capitalisation and Natural Capital development. The average economic growth rate of India may stand around 6.8% during 2011-2021.It is general trend already set in irrespective of who ever is ruling the nation. Demonetization and GST tax reform have only transitory effect. At this juncture India needs huge investment in development of human and natural capital, otherwise it will face big disaster.
Dr.Raghuram Rajan continues to think that he is the RBI governor. I recall that Dr.Rajan was also the CEA for some time. If his tenure in India under UPA was best, and UPA government gave him free hand, why didn’t he set out to achieve what he is prescribing now to Modi government. No doubt, Modi has a propensity for working through bureaucrats, insteads of his ministers. Bureaucrats can be accused of not taking decisions or refraining from rteforms. But, ministers work for political objectives. Where does the remedy lie according to Dr.Rajan?
Try to give a coherent and logical retort to his views, rather than hit below the belt, which is easy when you run out of logical arguments.
Well said Mr Murali !
Mr Gururaj is unable to muster a single argument based on economics to refute the sound claims made by Dr Rajan and instead resorts to taking cheap potshots : “Dr.Raghuram Rajan continues to think that he is the RBI governor..” and so forth.
Niraj Pant https://www.indiatoday.in/…/sitharaman-s-husband-hits…
Now even Parakala Prabhakar, the husband of Nirmala Sitarman the Finance Minister in the Govt of Narendra Modi, he also happens to be an Economist but I can’t say of his standing in the field, has criticised the attack of BJP Govt on those who headed the Govt before the current Prime Minister; in this he has specifically taken name of Manmohan Singh and Jawaharlal Nehru in his piece in The Hindu newspaper of 14th October 2019, titled, “A lodestar to steer the economy!”
Does this Govt want to listen to the criticism that has a degree of being internal?
What is Democracy? People decide in which direction the country has to go by a majority.
Now ‘Majoritarianism’ slogan is another effort directed by the western interests and carried forward by their foot soldiers all over the world to undermine the Will of Majority. In Indian contexts, it definitely sounds as ‘Anti-Hindu’.
So, serving the interests of just 10-20 % of the people of the Country who are minorities, qualify as Democracy? Never!
RR had his moments of glory as a RBI governor. Every government is different. If he was shrewd and a man of vision, he could have been in good books of government and got an extension. After that, he could have carried out / advised the government all his reform ideas. He put his ‘intellectual ego’ on top over the national interest. He overlooked bad loan problem under UPA-2 and made an issue only under Modi government. Wasn’t he an economic adviser to UPA-2 and later RBI governer in 2013?
Why is he now whining?
This is the problem with all these intellectuals. They have ideas but do not know how to implement it intelligently in Indian contexts or under given circumstances.
The Govt, read PM Modi, didn’t listen to Dr Raghuram Rajan as Governor of RBI, and it’s unlikely for him to listen to him now. PM Modi is ready to listen to only those who can speak the Master’s voice for which the Prime Minister would need to depend upon Shaktikanta Das, Rajiv Kumar and Amitabh Kant.
Had the Prime Minister listened to Dr Rajan in 2016, the disastrous action of Demonetisation won’t have got unfolded and our economy won’t have been where it has landed.
I don’t believe for the Majoritarianism can be reversed now as now the majority community has tasted the blood and it’s in place for good now; similarly, the Prime Minister believes he is the epitome of all the ideas and sagacity and others need to unquestioningly keep doing what he and his office asks.
For the next ten years and even for more this will be the order of the day; one could see Narendra Modi passing his chair to his consigliere, Amit Shah. That will be continued play of the same thing as the Opposition is dead and nothing is even visible on the horizon even.
One of the best comments I have read on the subject so far.
When the PM trusts a quack in economics called Anil Bokil of a dubious outfit called Arthakranti rather than highly qualified RBI Governor Rajan and unleashes demonetisation upon the country, the omens are not good. Anil Bokil was the “savant” who initially propounded the note ban idea and the PM fell for this man’s PowerPoint nonsense. The result has been a devastation of the informal economy which employs 82% of India’s labour and is worth nearly 50% of GDP. One might also recall that Baba Ramdev, another excellent economist also had this idea although it was Anil Bokil who succeeded in convincing the all knowing Delhi University graduate and PM of the country.
The malaise goes even beyond dis-regarding the advice of Dr Rajan. Other trained economists have declined to work for the Hindutvaists. Dr Urjit Patel and Arvind Subramanian were the other top notch economists who quit in disgust with the PMO interference in many matters, some purely technical. Of course, the PM can rely on his army of middle class bhakths who will gladly pin the blame on the Congress or Rahul Gandhi rather than hold the Modi government responsible.
I fully endorse what you say Mr Niraj Pant.
Whether Rajan is a politician nor not does not matter but what is wrong in what he says.Let us stop questioning those who question the present dispensation who think that they should have the final say in whatever happens in this country.
I agree with Rajan. Centralised decision making has its own disadvantages. This was evident during the failed experiment of demonetisation, when even Chief Economic Adviser was not consulted. The country cannot be run by whims and fancies of just one individual.
During UPA 1 & 2 every files were approved by 10,Janpath Supreme power empress.Any doubt dosth?
When did the economy become too big ? Was it not so big when Mr. Rajan was part of the Government ? Was it then being run from the PMO ? If not then obviously it was free for all considering all the scams that are pouring out. Has the economy grown too big after he left the government and while it was being run from PMO ? Wonderful words of wisdom would have been more useful with clarity on who is at fault.
raghuram rajan has performed the best he can and appreciated for what he had achived in his life as a indian from india .Now finally after reaching such powerful positiom where someone doesnot want to go away from this lucrative position ,just for defending the interest of indua ,he declared he is not able to accept more tyrannical and distructive decisions of narender teli ,so he resigned from his job and whatever he is saying about the strategies and policies applied by this narender teli government is the best recipi of leading the country towards disaster and sooner or later we are going to face this crises ,but for those who still believe in narender teli are basically moral corrupted ,selfish ,self centered ,communal and criminal gangsters ,though religion is declared an important option to join teli gang ,and when we see hindu religion which is based on certain fundamentals of life where every clan is given their part of work to run the country and hindus follow it very strictly ,but when we see narender teli to be the head of their political criminal gang ,it really confuse us and make us to conclude either narender is not teli or hindus are just bunch of liers who love to manuplate according to their needs ,and the cast system they have defined is just a cover up to persue their agenda ,because someone from teli clan can never be appointed as the head of state according to hindu chronicles ,and teli is declared as worthless a farmer who is good at producing oil ,but not allowed in politics because of their selfish,disgrassive ,selcentered ,cunning way of life and they are declared as manuplaters who can cheat any one and make the lie accepted in the society that is exactly what narender teli is doing and what i m writing here about teli community is actually written in the chronicals of hindu elders so there is a very famous parable which states that the status of king cannot be equal or even close to a teli ,in hindu it is written ike kahan rajaboss ,kahan gangu teli ,it alo tell us that we were ruled by kings like rajaboss who were known for their intellect and justice and teli known for his selfish way of life and when teli is appointed as the head of state of present india it will definatly turn the country of legends to ruins and scatter the honourable and intellectuals of our country because telis are known for their self proclaiming intellectuals and cannot allow true intellectuals to play any role in the betterness of society so those who declare narender teli as hindu devta or avtar of bhagwan than i want to ask them what was the last time you accepted avtar from teli clan and if teli are declared thiefs and selfish than why forcing whole nation to consider teli as the avtar for performing the role of primeminister ,definatly teli is going to disppoint ,divide and destroy the nation so it is not narender teli who should be blamed it is the hindu elecders and intellectuals who lost their mind to share the benefits of the looter who is declared pm of india because most of the hindu elders snd intellectuals are famous for their self centered interest ,so hindu india deserves what they are going through under narender teli
Dr Rajan was forced out of his job as RBI Governor by PM Modi. Get your facts right place.
Why you musssie and castiest thug is hurted. You Muslim got hurted right, and for Narender Modi, he is from modh community. And one more thing Raja/Kinghas been made from many community of Hindu society.
It is better you castiest thug understand this.
Rajan has correctly analysed the situation . Bad effects of Modi’s dictatorial attitude are coming to fore. Indian economy is going to dogs
It looks like finally that RRR has crossed the red lines and waddled into politics. This move by him is indeed welcome. We can now respond to his ideas as a politician rather as an economist. It would be far better to read his articles containing his political ideas and advisories to PM rather than reading articles from ThePrint quartet of Kumar, Jyoti, Shivam Vij and Basu. ThePrint should immediately sign him up for a weekly column. We need well informed critics even if once in a while they go off the track, as Modi looms large all over the place.
In principle, what RRR says about over centralization of power at PMO is right but it is due to probably two reasons. One is that BJP has a talent deficit and second, we cant have a luxury of relaxed implementations left to the sweet will of the ministers in charge. So someone has to use ‘danda’ to get the job done and it leads to over centralization. The resultant consequence is that once this happens, no one willing to stand up and act independently. Gadkari could be one exception in the previous government as he soldiered on his own most of the time and achieved good results. Jaitley performed below par, though he was on his own.
Talent deficit kab tak chalega ? There are a billion people to choose from. Some incredibly smart, else Google, Microsoft would not be headed by people who were till quite recently Indian citizens. The Rajya Sabha route is always open. Quality, caliber, excellence, intellect, inke bina people will continue to make fuel patties out of cow dung in the villages. Mediocrity, ineptitude, trial and error are not options when we are competing with China, or even Bangladesh, now. Aap ko Ms Jyoti Malhotra se itni mohabbat kyon hai, kabhi samajh mein nahin Anaya. I read each word that she writes.
What was Rajan doing when he was RBI Governor, this guy is the sole reason for NPA problem. The present govt, problem is they continued with him.