Raghuram Rajan is an asset. Govt must stop hating him & take his advice
Once again, Reserve Bank of India governor Raghuram Rajan has made the headlines for being outspoken and too honest. His latest comments certainly haven't gone down well with Narendra Modi's NDA government, which is trying to play up the euphoria around India being the fastest growing economy in the world.
Addressing the 12th annual convocation of the National Institute of Bank Management, Pune, Rajan showcased his knack for one-liners, stating that the Indian economy was 'andhon mein kaana raja' (in the land of the blind, the one-eyed man is king).
The government is naturally offended, because somebody as well-respected as Rajan has gone against the International Monetary Fund's decree that India is a 'bright spot in the world'.
Rajan is among the 100 most influential people in the world, according to the latest Time magazine rankings. And even if one were to take these rankings with a pinch of salt, it would be tough to ignore Rajan's words given his stature among the world's bankers.
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Rajan was appointed to the RBI by the previous UPA government. And because of that, any time Rajan says anything critical, many in the current dispensation feel that he is serving the UPA's purpose.
But before passing any judgement on Rajan, it would make sense to look at the facts that put him at loggerheads with the government time and again.
1. Job creation
For the last one year, the government has been harping on the 7%-plus growth that makes India the fastest growing economy in the world. In the next few quarters, the IMF expects China (the previous holder of this title) to slow down, but it says India will continue to gain strength.
But, what is the use of this growth when it fails to produce jobs?
The government's own data shows that the number of jobs the Indian economy created in 2015 was the lowest since 2009, when it generated 12.56 lakh new jobs across eight labour-intensive sectors.
Fast forward to 2015, and the economy could create only 1.35 lakh jobs in one whole year.
Looking at these numbers, should Rajan and other responsible observers close their eyes and believe the IMF's song about India being a 'bright spot'?
2. Make in India and FDI
It has been almost two years since the NDA government came to power. It has since chanted two slogans: 'Make in India' and 'FDI'.
Newspapers are full of government PR that India has received the highest FDI in the world since the NDA came to power. But the real story is that India's manufacturing sector has only received 6% of this FDI boost, while over 50% flown in to the services sector.
This simply means that the world is not ready to 'Make in India' yet.
Another set of numbers that deflates the government's balloon of euphoria is the decline in exports.
For 16 months on the trot, India's exports have been falling. And while the government defends by saying that all emerging markets have witnessed a decline in exports, the fact is that if it truly is the 'fastest growing' and 'brightest' economy in the world, it should be able to buck this trend.
Before they launch into criticism of Rajan, NDA ministers, and Finance Minister Arun Jaitley in particular, should consider the fact that Rajan was one of the first experts in the world who predicted the 2008 global financial crisis.
Rajan has sound knowledge of world economies, so if he says something about the pattern of growth of the Indian economy, the government should take his help and advice. That way, India can become the true king among world economies, rather than just being 'andhon mein kaana raja'.