Business Standard: Informed debate on appointment of RBI Governor

Business Standard, June 16, 2016

Letters

Course correction*

Apropos Mihir S Sharma's column, "Why Raghuram Rajan matters" let it be reasserted that the outrage was not against well-informed, balanced media discussions on public issues; it was specifically against personal attacks on Reserve Bank of India Governor Raghuram Rajan. Rajan has responded gracefully, ignoring the bids to tarnish his image.

Unless exceptional situations materialise, positions such as the one held by Rajan should have a longer tenure of five to 10 years. Rajan should have been appointed for a full five-year term in 2013. But this is what happens when governments take short-term views on crucial issues.

Although past decisions can't be rewound to correct them, if Rajan had been groomed for a year starting September 2013, D Subbarao's term had been extended by another year and Rajan had then been given a five-year term beginning September 2014,  would have been implemented faster financial sector reforms during Rajan's era.

Hopefully, there will now be a rectification by reappointing Rajan - or a more efficient individual, if the government can find one, that is - for a full five-year term from September 2016.

M G Warrier, Mumbai

*This is the nicely edited, published version. I had written:

Informed debate

Apropos Mihir S Sharma’s column on “Why Raghuram Rajan matters” (Policy Rules, June 15), let it be reasserted that the media outrage was not against well-informed and balanced media discussions on public issues, but it was specifically against personal attacks against Dr Rajan within his entitled personal privacies as different from what he did as RBI governor. As Rajan himself has responded gracefully, ignoring the efforts to tarnish his image by some vested interests, let us not go back to that.

Unless exceptional situations demand, positions like the one now held by Dr Rajan should have a long-term tenure of 5 to 10 years. Dr Rajan should have been appointed for a full 5 year term in 2013. This is what happens when governments take short-term views on serious and crucial issues. I had observed in an article written on the subject during August 2013 (The Global ANALYST, September 2013) as under:

“The only negative in the whole affair is, as on several occasions in the past, once again GOI has opted for a short-term appointment. This time it should have been for a five-year term in the first instance itself…..Ideally, RBI Governor should have an average tenure of five to 10 years. If such a norm was followed, Dr Rajan would have been perhaps the 15th Governor of RBI. Now he is 23rd! All Governors who have stayed in office beyond 4 years have contributed to the strength of the central bank.”

I had even wondered whether the tenure was cut short to 3 years by wrong choice of ‘template’ while preparing the appointment notification! Though there can be no ‘rewinds’ to correct past decisions, one more year of ‘grooming’ for Dr Rajan from September 2013, extending Dr Subbarao’s term by another year and a straight 5 year term for Dr Rajan from September 2014, would have resulted in faster financial sector reforms during the ‘Rajan Era’ in RBI. Hopefully, there will now be a correction by appointing Dr Rajan (or a more efficient individual, if GOI is able to locate one for the present ‘package’ available to RBI governor!) for a full 5 year period from September 2016.

M G Warrier, Mumbai