Governments are well within their right to elect their own Central Bank Governors. But the way Raghuram Rajan's exit was handled, has left much to be desired.
The original saying is "in the land of the blind, the one-eyed man is king". Though what was actually said to the foreign journalist by RBI Governor Raghuram Rajan was the hindi version of "Andhon mein kana raja.”
(Now, if only he had used the original Latin attributed to Erasmus. No one would be any wiser. Though he would infinitely seem so!)
Speculation has it this is one reason which queered the pitch for an otherwise smooth, controversy free and normal re-appointment of the incumbent Governor of the Central Bank. Even so he is in good company. Dr. Manmohan Singh was just short of three years too!
Governments are well within their right to elect their own Central Bank Governors. India has a 81-year rich tradition of central banking. The U.S. has a 300 year democracy, but the RBI started just 22 years after the US Federal Reserve! India has had 22 previous Governors.
This is not the first time that such a situation has occurred. The imbroglio and suspense in Dr. Subir Gokarn's reappointment as Deputy Governor in 2012 too had left a bad after-taste. But the way this particular episode was handled, regardless of which way the penny finally dropped, has left much to be desired, and said for the overall mechanics as well as communication by various government arms.
Nonetheless, the role of Governors must be seen in context. There are four.
Role
Any smart country of significant economic size which has a credible and respected central bank Governor ( like Israel which had the famous economist Stanley Fisher), would find it in their best interests to leverage that status (trust,reputation & credibility) to the fullest in an effort to
- add much needed heft in an increasingly intertwined and competitive world of economic affairs
- Pull in and retain overseas capital, and
- act as a counter ballast to keep the nation’s currency value honest against proverbial marauding Gnomes of Zurich looking to short , and make a quick speculative windfall .
(Though these gnomes now exist in financial capitals east of the Suez).
Leadership
Putting one’s personal brand equity on the line is also a form of leadership (of the highest kind). Especially when put between a rock and a hard place. Like India found itself in 2013. When the said leadership worked wonders in stabilising the rupee. And stemming outflows that were hurting the economy on a daily basis.
But today’s changed economic times need changed mindset.
Sure there are quibbles on Rajan's policies, his thinking and the occasional pronouncements from the bully pulpit that the position offers. That's the nature of the multi-disciplinary economics beast.
Unlike the U.S. or other well developed market systems India is still a large, poor, though fast growing country. With deep and diverse issues outside of staid monetary policy.
To be fair it may not be strictly kosher or the norm or even a precedence to have such a proactive outreach by a Central Bank Governor (They are not supposed to be seen and rarely heard).
But this 'outspoken' nature was already a given and a known factor. No secret there. Not one of activism or any private agenda or interest. As some have perceived it to be.
If you are lucky to have a first rate intellectual at the helm of what is essentially a technocratic position with a reasonable public profile, communication skills and outreach ability.Then that adds heft to the status of a country.
It speaks of openness and artful wield of modern day statecraft. Not to mention it contributes in no small measure to national pride.
Track Record
Rajan came to India on the back of a vaunted, international public profile and recognised reputation amongst his exacting peer group. Making his name on the 'outlier' calls he made in 2005 and pulling no punches in his books. For a guy who topped some of the most prestigious and rigorous institutes in the World and excelled right along his career.
To have to reapply and interview for a job which he got on merit. Thereafter deserved more on the basis of his sheer performance on the job. It’s almost like you passed with flying colors. But he didn't make the next class. Because you were busy with extra curricular activities sport and giving tuition to other kids. Seems to be a travesty. Churlish even.
Cultural
Indians in general, are only too ecstatic to bask in the reflected glory of PIOs, NRIs or Indians (Green card or equivalent) who serve in top positions worldwide.Whether they be for foreign governments in academia, corporate, scientists, media, film, opinion makers, politics, astronauts, law enforcements, doctors, etc.
They are happy to be seen in their enviable and almost beatific like presence and some take credit even for their journey to the top!
And in turn are feted by them with pomp and splendour. But, god forbid if and when the same super achiever decides to come back to serve 'President and Country. Total chaos prevails. And our ever prickly and insecure nature kicks in. We revert back to our primal instincts of trying to cut the incumbent off at the knees - bring him to heel. The Indian crab syndrome.You are great. But greater still if you remain outside!
Whichever you spin this. No one comes out of such a situation looking good. And yes. It is about the country and its icon crazy young people. Beyond the just handful of people in film and cricket.
Road Ahead
To end on a positive note. Will we find an equally accomplished successor? Yes we will. Life will go. But that does not mean we forget what happened.