I made 2 observations on Monday, 20th June, which I thought will share with you. Again it involves Dr. Rajan – Yes I am a fan of Rajan. Many people would like to meet Rajinikanth, Salman Khan, Modi, Aishwarya Rai etc. but I have been longing to meet this erudite gentleman. I came to know that his parents live in Indira Nagar, Adyar pretty close to my office and heard that he visits them occasionally. Unfortunately I couldn’t find his house and I did not want to look suspicious trying to locate his house through courier person or postman, who I think should know.
Since Rajan’s exit news came on Saturday, it was apparent that the Stock Market and Currency market would react (how much is debatable). But to show that his move is just another exit, Modi and his team seem to have done some groundwork. The FDI news was preplanned, some ministers asked how they can plan such an intricate arrangement in just 2 days. But that does not answer the question of planning this proposal well in advance and making the announcement to coincide with the specific date (The door was shown to Rajan much earlier is my guess) as it was just the formal announcement that Dr. Rajan sent to RBI officials. If you had noticed the stock market reaction, the Sensex was down by more than 200 points to start with but then recovered and ended positive. The FM and Government was keen to prove that Rajans exit is a non-event.
I was also surprised as how this would be possible and guessed it right. Foreign investors had sold equities worth 537 crores that day while the government/finance ministry had intervened and pushed Domestic Institutional investors (DIIs), LIC and SBI to buy equities to an extent of 724 crores to counter the fall. Similar intervention has happened in the currency markets.
This is not the first time that the DIIs had to do this and has been done many a times in the past (even during Congress rule). If this is how LIC buys equities, you can be assured that their fund management is always below par. I have heard people say that LIC can do so well that it cannot even beat the Sensex or Nifty benchmark and what this means is owning the stock portfolio by mimicking the Indices for which there are automated tools and don’t need fund managers.
I am not trying to convey that Rajan should have been retained (as the damage was already done) as the RBI and Finance Ministry need to work together but there are enough evidences to prove that they don’t see eye to eye. This will result in trying to challenge one another and Rajan’s performance in such an environment would be suboptimal. There is no way Rajan will be able to win the war against the no 2 in the government. In that way I am happy that he can do some concrete work rather than caught in the midst of Politics.
My second observation was while watching the TimesNow Newshour debate conducted by Arnab. I had high regards for him as whatever said and done he is able to clean up the system (again what extent is debatable). He keeps ranting that he maintains distance with both Congress and BJP but I have noticed that he criticises Sonia Gandhi and family to the core, while being relatively soft on Modi and BJP (What is the conclusion of Nitin Gadkari’s picnic in a yatch in Europe, Sushma Swaraj’s controversial relationship with Lalit Modi or the Rajasthan CMs letter written in secrecy to UK). Whether it is Bora or Augusta a sensation is created and I am not sure if atleast 1 of these issues were logically concluded. But you need to appreciate his vociferous journalism to bring some of these to light, which was not happening earlier.
The 9 ‘o clock debate was on 2 issues and one was the exit of Rajan. Dr. Sambit Patra of BJP, Lord Megnath Desai and CPI secretary Atul Kumar Anjaan were part of the show (I don’t recollect the rest and not required for this observation). Arnab started blasting Rajan saying he did not behave in a mature way by announcing the resignation on Saturday (I don’t think there is any better day than Friday evening or Saturday to minimise the impact and had no clue what he was talking about). Arnab was continuously abusing Dr. Rajan and insinuating the speakers in the debate. Lord Megnath Desai did not budge and was supporting Rajan, same as the case with the CPI secretary. The BJP spokesperson Dr.Sambit Patra said the he does not understand Economics and RBI in detail and does not want to comment. This is a program or rather only program that I watch in TV and now decided to watch some movies (Yesterday was John Q in MN+ HD) rather than watching a BJP stooge program. The least such guys can do is not to sully the image of a reputed Economist and a simple person.
Narayanamurthy, Lawrence Summers, Christine Lagarde, Amartya Sen, Arundhati Bhattacharya, Chidambaram, Dr. Manmohan Singh, Nasscom and Assocham, all can’t be wrong
<Blog # PenguWIN 1040 – Observations from RRexit>
100% agree. Rajan tried hard to clean up cronys and their official loot of people’s money. It hurt some folks in power. To start with SBI had to drop off a plan to fund Adani. If Rajan stayed the murky list of crony capitalism would have out. That’s dangerous to all parties as more than half of all loan write offs potentially get routed to politician buckets.
He should now stay out of the system and still voice over some opinions from university lectures.
Coming to Arnab, that us one funded program I completely avoid these days.
Rajan was definitely a fly in the ointment for crony capitalists of India. And that group would have leaned it’s mighty weight in pushing him out. But I think there may have been two other contributing factors too.
One – that he did comment on things that strictly didn’t fall under his job description and actually embarrassed the government while it was hard-selling India to foreign investors. Examples are: India is like a one-eyed King in the land of the blind / We should do Make for India rather than Make in India. As an academic you can voice your opinion on all and sundry but as a public servant of government of India you should be more careful.
Second – some people also had the opinion that Rajan may have been carrying his spring cleaning exercise in the banks a tad too far. Such people were commenting that this is stifling the growth of the banks. Also as we all know there was the perennial question of what interest rate is the best when it comes to serve the interests of both the common man and the entrepreneurs. The government may also have given credence to these opinions.
At the end I think what happened, happened for the better. Rajan will be back to the classrooms now with the added experience of leading the central bank of a big economy. I am very sure his lectures will be more interesting. Also government of India will be able to replace him with someone who is also capable and shares the government’s vision. May be the vehicle will move faster and smoother with both wheels in tandem.
Rajan’s stint was timely but a term short. He stood for the middle class and didn’t give too hoots about the rich and powerful. That he got the boot is hence no surprise.
We should celebrate his term and wish him well. It may not be too far to see him as World Bank or IMF Head.
It appears like to appeal the masses or plant stories the Govt has since long been using “Saam” , “Daam” , “Dand” , “Bhed” to showcase how big and powerful they are and such small things wont affect the machinery and it will keep on going, this might be true to some extent but it cannot go on and on..like this without any retribution maybe down the line but will happen.
Well, to show case nothing has affected much by Dr.Rajan’s exit they have utilized multi directional support
1. They have their mouth pieces aka TV programmes , News Papers to send feeders .
2. They wield the power to coerce Domestic Institute Investors to paint the picture in markets differently using again our hard earned , hardly money
3. They have Bazooka Swamy’s to thunder headlines for creating diversions
All these techniques have been and are being used by the Govt in power – to keep the population in a perplexed situation and confused state of mind, so that they keep on milking money under the guise of increased taxed and creating new headers of Swach Bharat , Krishi Kalyan for increasing their own personal wealth.
I would not be amazed to see a new cess down the line on Fresh Air with the noises with no action plans – they are making on pollutions levels in major cities.
Coming back to the topic , i dont think they would let any sensible ,straight forward & honest person to survive for longer duration , within their ranks . As all the exposure such person will point blank showcase that “The King is not Wearing Any Clothes ” and this may bring in a reality check leading to crisis.
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