Undermining RBI governor will have negative consequences

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Raghuram  Rajan's departure holds lessons for all.
We need to learn how to  value and retain talent.
At the same time the talented too must  realise that talent alone does not ensure the top job, says Sanjeev  Nayyar.

I  am an admirer of RBI Governor Dr Raghuram Rajan. Having assumed the  job during a very difficult time, he brought stability to the  markets, inflation under control, started a war against crony  capitalists and tempered interest rate cuts admirably.

Under  his stewardship India's foreign exchange reserves have touched record  levels. He came with internationally acclaimed academic credentials,  brought a global understanding of financial markets to the job,  became governor at a very young age and was the first governor to  have come from outside the government/RBI system.

Not  only is he very articulate, but his dashing looks and personality  fetched him a 'rock star' status. By making known his intent to  return to the groves of academe much before his term ends, Dr Rajan  has given the government enough time to find a successor, again a  commendable thing to do.

Having  said that, the campaign for his extension and the timing of some of  Dr Rajan's words call for introspection.

One,  the media support and online petition for Dr Rajan's extension.

Sections  of the media, led by business newspapers and television channels,  drummed up support for Dr Rajan's extension. Post Dr Subramanian  Swamy's intemperate outburst, a number of leading intellectuals  rightly defended Dr Rajan. A leading Modi baiter recently wrote,  'Transition in RBI's top job should be openly discussed, and the pros  and cons of possible candidates weighed by the public.'

Earlier,  too, when Dr Rajan spoke on matters outside his domain, he received  widespread support from the liberals.

In  short, Dr Rajan became a poster boy, larger than life, for the  English media and the liberal class. Let us take a fictional example  to see how his extension might have panned out elsewhere. Just assume  the following scenario.

Natasha  Singh, editor of New  Delhi Times,  revamped the paper to make it very readable. She became so popular  that even competing newspapers began to write about her. Her  relationship with the owners, the Pollock family, was mixed. They  disliked her independent streak but admired how she turned around the  newspaper.

At  43, she was the youngest among her peers. Her five-year contract was  set to expire in November 2016. Five months prior, the owners of NDT were bombarded with mails demanding Natasha's term be extended.  Well-meaning readers started an online petition too. She was spoken  about as being indispensable to NDT.

The  Pollock family were in a Catch 22. On one hand they knew how Natasha  connected with the readers while on the other they invariably had  little say in the way the paper was run. They were also worried about  Natasha overshadowing the Pollocks and assuming a larger-than-life  persona.

Discussions  with Natasha went to and fro for months. Eventually the Pollocks  decided against granting her an extension and promoted an equally  talented lady as editor.

Observation  one:  In any organisation no employee can come to assume an image of being  larger than the institution itself or that of the owners.

Readers  might recall how Ratan Tata, on assuming leadership of the Tata  Group, systematically went about cutting the wings of group satraps  like Ajit Kerkar and Russi Mody. Here is an interesting  story:  'Some time in 1991 -- just two years before his retirement ('ouster'  would perhaps be a more appropriate term) -- Russi Mody had invited a  few journalists from Kolkata to visit the Jamshedpur plant of Tisco,  as it was then known, to figure out which way the wind was blowing in  his battle with Ratan Tata.

His  crisis managers took the team to a few areas in the plant where  workers had put up huge placards saying, 'Jab  tak suraj chand rahega, Russi Mody tera naam rahega.  Predictably, the next day's headlines in a few newspapers read:  'Workers throw their weight behind Mody'.'

'It  was an obvious naivety on the media's part, but the stage-managed  show of workers' support for him was also a reflection of the  desperation of a man who wanted to retain his throne somehow.'

Another  example could be the former CEO of a leading Hindi entertainment  channel, who probably lived with the illusion that the turnaround in  the channel's fortunes were solely because of him and a single  successful programme.

Observation  two:  The Modi Sarkar's relationship with the English media can at best be  termed as lukewarm. Used to a Congress way of thinking and working,  they are just about beginning to understand and accept the change in  style. Some even mock the prime minister for his inability to speak  convent-educated English and his Gujarati accent.

Clearly  the PM has a mind of his own. He will push the system to realise his  vision of Jan Dhan Yojana, digitisation and is against crony  capitalism of the type witnessed during the UPA. By virtue of his  Gujarat experience Modi knows of the media's double standards --  statements like 'transition in RBI's top job should be openly  discussed' were never written during Congress rule but is reserved  for the BJP.

It  is thus no surprise that the government has chosen to let Dr Rajan  resume his career in academics.

If  the media had not created so much of hype over Dr Rajan's extension,  maybe Dr Rajan would have further gained from working in the real  world and India too would have benefitted.

In  India, for sure, there is merit in being low profile. Ask Vijay  Mallya, or learn from the late Harshad Mehta.

The Business  Standard editorial of June 13, 2016, stands out: 'An unnecessary controversy  has been generated in the traditional and social media over Reserve  Bank of India Governor Raghuram Rajan's possible second term. Such  ringing endorsement of a central banker -- including online petitions  and supportive statements from sundry Mumbai industrialists, Mohamed  El-Erian, the influential chief economic advisor at Allianz, and  Luigi Zingales, Mr Rajan's University of Chicago colleague and  co-author -- is unprecedented.'

While  I admire Dr Rajan's decision to inform RBI employees of his decision  to move on after the markets had closed, thus not destabilising the  financial markets, the communication is unprecedented in government  and corporate worlds.

How  would the boards of Unilever or Tata Sons respond if the CEO of their  subsidiary had addressed such a communication before leaving? It is  no ordinary mail and virtually a report card of Dr Rajan.

Since  when have Reserve Bank of India governors started giving out report  cards to their employees? Or, is there more here than what meets the  eye?

If  the timing of Dr Rajan's communication had government buy-in, then  the exit could have been managed gracefully.

At  the same time, Dr Rajan did not endear himself to the government with  some badly timed statements.

One  was his convocation  speech at IIT-Delhi where he got caught in the very polarising tolerance  versus intolerance debate.

Also read by author http://www.dailyo.in/politics/rbi-raghuram-rajan-iit-delhi-godhra-riots-fdi-secularism-swami-vivekananda-nda/story/1/7181.html

As  a citizen of India Dr Rajan has an equal right to speak his mind. As  RBI governor, Dr Rajan should have been careful.

Instead  of courting controversy, I wish Dr Rajan had told IITians how his  study of science had helped him in his job as an economist or asked  why so many IITians do not make a career in science but end up  selling soaps or in financial markets.

Two,  when the prime minister launched the Make in India programme, Dr  Rajan spoke about India not following the Chinese model etc. Without  getting into the right or wrong of the points made, is it  appropriate? Or is there a precedent of an RBI governor commenting on  matters of government policy? Or, was Dr Rajan speaking as a leading  economist?

Again,  this controversy was best avoided and surely did not endear him to  the government which wanted to revive manufacturing and employment.

Also  read by author,   Make in India makes sense Dr Rajan, countries cannot be run by economic theory alone

Former  RBI governors like Y V Reddy and D Subbarao too had differences with  the government, but the details were rarely in the public domain.

Notwithstanding  the above, it is possible that the IAS lobby ganged up against  'outsider' Dr Rajan, industrialists affected by his NPA drive lobbied  against him, or 'there were concerns that the role of looking for the  next governor would be entrusted to a selection committee, whose  members did not have any experience of the RBI.'

According  to a report, 'Rajan demanded that the governor's job be given Cabinet  status since the RBI governor is actually higher than the finance  secretary in ranking. The demand was turned down. Recently, the  government decided to make him a member of a panel that would  shortlist a deputy governor, a panel that would be headed by the  Cabinet secretary, and not the RBI governor.' It is possible Dr Rajan  did not like the attempts, correctly so, to undermine the governor's  position.

It  is up to the government to now send out the right signals. Attempts  to undermine any RBI governor will have negative consequences for the  markets and India's credit standing.

Dr  Rajan's departure holds lessons for all, be it sections of the media,  politicians or the people themselves. We need to learn how to value  and retain talent. At the same time the talented must realise that  talent alone does not ensure the top job. Ask Dr Manmohan Singh!

India  survived post Pandit Nehru, Indira Gandhi and grew significantly  under P V Narasimha Rao and Atal Bihari Vajpayee. Samah  kissi ki leye nahin rukta hai (time does not stop for anyone).

We  shall miss you, Dr Raghuram Rajan, our best wishes always!

First  published Click here to view

Sanjeev  Nayyar, an independent columnist, has worked with some of India's  best corporates over a career spanning 14 years before turning  consultant and life coach. On Twitter: @sanjeev1927