K R Nayaranan and Dr. APJ Abdul Kalam established the President of India as the country’s highest office in real terms. They were the highest officials of the country who acted independently and not as the rubber stamp of the elected government in India that is run by its Prime Minister. They brought honour to the office. They made the ‘Rashtrapati Bhavan’ a respectable place. They, for the first time during their respective tenures, made Indians believe that the President of India was indeed the nation’s highest Constitutional custodian.
Obviously when we say so, we don’t include luminaries like Dr. Rajendra Prasad, Dr. Zakir Husain and Dr. Sarvepalli Radhakrishnan. They commanded respect and they got it. They were in the league of pre-Independence greats.
Then comes the Election Commission – one of the most important institutions – an institution that is imperative for the Indian democracy to march ahead. Before T N Seshan, the EC was just any other institution, running under the flow of our political system. Seshan made what the EC is today – a Constitutional organization that works tirelessly and independently and ensures that the largest elections in the world, here in India, are run transparently and smoothly. The Indian Election Commission has become a model throughout the world.
And that is what Dr. Raghuram Rajan has done with the Reserve Bank of India – India’s central bank. Before Rajan, the RBI was just like many other organizations – like the EC was in pre T N Seshan days. Though the RBI is the most important financial organization of the country regulating the flow of finances in the system and thus maintaining the fiscal discipline (and health) in the country, it always worked in the shadow of the Finance Ministry – before Raghuram Rajan was appointed in 2013.
Born in India, (Rajan’s parents still live in Chennai; they said that Rajan could have stayed had the Government of India decided earlier on extension of his term), Rajan is an economist respected worldwide. Though those who preceded Rajan were no lesser intellectuals of their field, we need to accept that no one had a global stature like Rajan. He became the youngest chief economist of the International Monitory Fund in 2003. He predicted the global financial meltdown of 2008 in 2005. He is a professor of finance in the University of Chicago where he has said he would go back to after completing his term as the RBI Governor of September 4 this year.
He was appointed by Manmohan Singh in 2013 and his three year term is coming to an end. And when Dr. Rajan says three years is a short time, it makes sense. Reforming a banking system that has NPAs (non-performing assets) to the tune of Rs. 8 Lakh Crore cannot happen in just three years. We are still an economy hugely dependent on the whims of Monsoon and thus so inflation prone. That requires a consistent policy alignment with the elected government. Then there are bottlenecked issues like the banking sector reforms, corruption in the financial systems and opening and expansion of the overall financial sector.
That makes the position of the RBI Governor a critical one for India’s economic health. The person needs to settle down. He needs to map the scenario as complex as India’s banking and financial sector – and that takes time. He needs to understand the priorities of its inflation-focused economy and how to maintain a balance among the stakeholders – the government – its financial institutions including banks – the people of India – and even the weather. He needs to draw his roadmap based on all these factors – with volatility always lurking in the background. You cannot predict weather. You cannot gauge the mood of a financial system with such a large share of bad loans and assets. And thus you cannot be sure of the intent of the government. To take everyone on board again takes time.
Once you have got what it is and you can see where to go and how to go – you chart your way ahead that requires time – to see your efforts realize their potential. A person who has started on a roadmap ahead after deliberating on such a complex scenario needs time to implement his decisions – as Dr. Rajan who has put a system in place but he, now, cannot see how it moving ahead. He will not be here to monitor its implementation beyond September 4. And the next person may not follow what Dr. Rajan has begun.
It is not about good or bad. It is about consistently and three years really fall short of the requirement.