Sunday, June 19, 2016

Goodbye Dr. Raghuram Rajan

Once upon a time there was a great manager in a great organisation who did wonderfully well. He was there on the basis of his competence and past track record. He had many great predictions to his credit and was a person respected for his knowledge and competence in his subject.

His boss though was a typical type A personality, rags to riches, rose to the top of the corporation, almost uneducated, but a man with amazing statecraft and could not bear the idea of an individual a many times more intelligent - reporting to him. This manager had the confidence to call spade a spade, could take all great actions in the interest of the corporation, was loved by all the customers and vendors of the corporation and also by all his colleagues.

But the boss, delusional and self-consumed in his hubris wouldn’t have any manager in his corporation who could look up in the Boss’s eyes, take rational decision, and challenge the usual.

The Manager quit. The Boss was happy. The corporation suffered. And it was business as usual.

While this is a story (with minor variations) of almost all corporations around the world but, If You haven’t been able to figure out by now what I am talking about/writing about at the expense of my sunday afternoon glass of Chardonnay you might as well close the browser.
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I was having an idyllic drink with my dear friend Sundeep Sahni last Sunday on the 12th June and were discussing the usual. A banter about the Brexit, Raghuram Rajan’s term, the state of the economy and the stress in the global markets that’s still hidden from the eye of the common man. Sundeep was so sure that Rajan would get a second term. Sundeep’s argument was:

  • Rajan is too good and intelligent a guy to be consumed by petty politics
  • India needs him
  • He has brought in fiscal discipline
  • He has exposed crony capitalism
  • Forex reserves are at a life time high under his stewardship
  • India’s respect as a meritocracy driven nation is highest in the international finance and business community
  • And he can call spade a spade
My argument was:

Calling spade a spade is the biggest problem
Yesterday Sundeep called me and said – ‘My God You were right’

Modi would have never allowed Rajan to stay on and neither would Rajan have stayed on - and it has been so evident in the last 2 months.

Anyone reading this piece is educated enough to realise and acknowledge that…
  • Subramaniam Swamy had no guts to raise an issue without the tacit permission from the top
  • He is a drama master for the Government
  • When the contents of our deep freezers have to be ratified by the religious zealots of the establishment, how could a man be allowed to take decisions on the interest rates and fiscal policies of the nation (no matter how good and beneficial they were)
  • Rajan created a system that exposed the severe fault lines in the banking system. A system that was definitely used, it is believed, to siphon off over 100 billion dollars.
It’s a shame that Mallaya is being trolled beyond imagination because he defaulted on a billion dollars in business losses. Afterall everyone took a risk - the businessman and the lender as well. No one has raised a question on the massive debts that are lurking in the banking system. And this is what we know of. Mallaya’s only real fault – he kept walking around and getting photographed with arm candies by his side when the employees of Kingfisher were in dire straits.

Mallaya ran a loss making airline and banks kept funding it without adequate underlying security/collateral. And if they did, why the fuss now if he isn’t able to repay.
Try raising a small loan from a nationalised bank. They would want a collateral for a collateral. There is no way in hell that you would be able to default.

And Mallaya’s ‘Kingfisher’ brand was taken-in as collateral to the tune of almost half a billion dollars by State Bank Of India. Did they dream of rechristening State Bank India to Kingfisher Bank of India in-case Mallaya defaulted or did they plan to co brand Kingfisher with SBI on T shirts and souvenirs and turn it into a multi-billion dollar enterprise?

A guy like Rajan was dangerous. Utterly dangerous to this caucus. And he had to be removed.

So a nationwide drama was created to embarrass him and raise questions on his integrity and his patriotism. My God – Swamy called him an agent of the American Corporations or CIA.

Any self-respecting, educated, subject knowledge expert doesn’t have time for all this bullshit. For he/she knows that the corrupt system doesn’t deserve him/her. Remember the protagonists in Ayn Rand novels.

And then….

Rajan knew better as well.

He could see that the world is on a precipice of a serious financial meltdown. I have repeatedly said in my previous pieces that 1929 or 2008 would look like a walk in the park. When that happens and when the big bubble bursts no one knows. It could be 6 months or 6 years. But whenever it happens it will be far more painful than Sep 2008

And obviously Rajan wanted to leave on a high. He did what he did and did it beautifully. Only people with innate knowledge of economics would agree that controlling inflation by a few hundred basis points is far more important than a few hundred basis points of growth in GDP. And he did get a grip on inflation.

Rajan could foresee that rupee’s sharp decline is just round the corner and the cascading effect of global issues on Indian canvas of finance, growth and banking would have been huge and seriously difficult to manage.

And in the face of such degenerate pettyism by the so called patriots why would have Rajan sacrificed the comfort and respect of being a top academic on this planet for the corruption stained corridors of power in the North Block.

Lets see 'NOW' India achieve 10% growth in GDP and a strong Rupee – now that Rajan will be history soon.

17 comments:

  1. So much for meritocracy!!!! So much expectation from the new government but hence proven that it's old wine in a new bottle. Maybe If Chetan Chauhan had waited, he could have been the next boss of RBI - after all he has banking experience. And he also has opening experience- oops, that's opening in cricket and not account opening

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  2. Wonder if this piece will attract the wrath of the " nationalist " . Now that another" anti national " is out of the way, the decks are cleared for boss to take a "closer"look at the economy! Manu Rishi Guptha has demonstrated very well the malaise afflicting this country !

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  3. Thank you for this piece Manu. India's loss would be someone's gain. But I feel people like Raghuram should stand their ground especially when they see a crisis around the corner. After all it's India we are speaking about and not Modi's back yard.

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  4. I guess we will now get yet another cheerleader like we have at the censors board and other institutions. I am surprised that Rajan was even allowed to complete the full term.
    Anyway, hope there is due diligence carried out in selecting the next Guv, the country needs real talent at this time and not a spin master

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    1. In Modi's land of the blind (cheerleaders with zero credibility) a person with even half credibility is treated as person having a disease that needs to be cured (I.e. turn into a full cheerleader)

      No wonder Rajan chose to runaway just like the protagonist of HG Well's novel

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  5. It will have a short term impact on 1.2 billion population. ....evil and corruption continue to rule the country...I only hope the growth path will remain intact.....leaving alone 10 pc number....cheers

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  6. Hi may I write few comments... If I just agree with you like everyone else, I guess it wouldn't lead to a meaningful discussion which is the objective of the piece you have written
    1. The boss is not uneducated and definitely not self consumed & delusional- no body now needs a proof of that considering where India has moved in just two years.
    2. To write "1000 times intelligent " is nothing but a loose statement. The fact that Guv could execute what and how he wanted to - do you think it was possible without the blessings of this less intelligent boss ? RBI is not judiciary that has to be independent of the government.
    3. Just because the guy is an expert in a singular domain (which is also influenced by western methods) not necessarily means that he is also an expert in running a state.
    4. Why is there a fuss when the Guv is leaving? His term is coming to an end, it is not that he has been sacked..he has not been given extension but then that is not something unknown as a decision that many governments take when contemplating the successor for important offices.
    5. It's premature to start ranting - the government has been chosen by the people of India, they have got clean majority which means they have the nations trust and confidence- give them time at least till the end of their term if not more.

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    1. clean majority, did you say ? Some 37% is clean majority ?

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  7. Boss He had the guts to say what he wanted to say. Even after so much of provocation the way he reacted to SS's allegations is a lesson to learn.

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  8. Its high time that we keep politics away from issues like economy, defence, education etc. RR no doubt is the most competent person. His successor will no doubt be from the political camp. Bhanu

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  9. I can just comment that Kauravs had best of the best with them in the war, masters who were the most experienced and the best in their respective feilds but Krishna made the difference.Not comparing Modi with Krishna but atlest he has the vision and trying to do something, as living overseas since 1997 I can see the change in the image of India since the new PM took charge. This is the best that could happen and it happened in the right time.For India to progress we needed a leader with vision and we have to give PM at least 5 years before we give the judgement.

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  10. Monetary policy is a tricky subject and Rajan was probably right in his analysis of rate cut vis-a-vis inflation. Govt could have handled his exit better than unleashing Swamy on him. Not good politics.

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  11. A matured modern nation is one where no one is considered indispensable. India is fast becoming one such nation and Rajan is just another individual who had his time...........

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  12. It is interesting that the few folks I know abroad seem to think that India has changed so drastically with the onset of this government, without really experiencing daily realities here. Farmer suicides? Farmer who? Who cares anyway when our image is shining!

    Manu, it is nice to read writings by someone who can write well and with a sense of humour. Do keep the creative blogging juices flowing..

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  13. It's too much to assume that Rajan did not know his politics or had no time for it. Apart from being a good economist he is an equally smart PR guy and managed to keep himself in news in all the three years. If he has to be the next IMF Chief, he had to leave while the going was good - and that is what he did. We have always had conservative Governors and good Governors, Rajan was one of them. I thought YV Reddy did a fabulous job of keeping India out of crisis when the whole world felt the impact of subprime loans crisis. In fact one cannot recall a single Governor in the past 25 years who was not good and up to the mark - same as in case of all the Chief Election Commissioners subsequent to T.N. Seshan.

    With all our faults, India respects regulatory bodies and does not tinker with their independence - be it RBI, SEBI or the Election Commission. I have no reason to believe that the next person would toe the government line. The position itself bestows authority and independence (remember Giani Zail Singh in a different context).

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  14. Well, at least Manu's blog has set people thinking deeper into the subject and lots of good conversations have come out as pro's and con's of this event. Nevertheless, it remains to be seen that how far can dictatorial behaviour be carried under the garb of dynamism and growth. Needless to mention that the lessons learnt from past should not be forgotten so soon. Power corrupts, absolute power corrupts absolutely. Wishing well for the country and the Manager, I wish good sense to prevail.

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  15. Manuji I beg to defer from you.rajan is very smart but we have smarter people.india is abundant of talent.if rajan goes subir or urjit will do still a decent job.he killed the industry by not cutting the interestrate.assume manuji you are doing well but that should not allow you to talk wrong about your boss.incidentally the boss allowed rajan to do whatever he wanted.the boss has just taken charge allow him to settle.afrerall HE IS THE BOSS.

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Your comment is immensely appreciated and will be published for a discussion - soonest. Thanks. manu