Long Before Finance Minister's Dig, Raghuram Rajan Said This On RBI Job

"...I do respect Raghuram Rajan as a great scholar who chose to be in the central bank in India at a time when the Indian economy was all buoyant," Finance Minister Nirmala Sitharaman said on Tuesday during a talk at the Columbia University.

Battling criticism over the growth slump and the bank crisis, she also said public sector banks "did not have a worse phase than when the combination of (Manmohan) Singh and Rajan were Prime Minister and Reserve Bank of India Governor. She squarely blamed the internationally renowned economist for the current crisis in public sector banks, implying Dr Rajan had a cushy time when he took over as RBI chief. But read what Dr Rajan himself had to say on coming in as RBI governor in 2012 in the book "Defining India: Through Their Eyes", published in May 2019.

"At the time, things were going from bad to worse in India. After the global crisis, inflation was picking up, the current account deficit and fiscal deficit were widening. It was in the summer of 2012 when Mr Chidambaram came back to the finance ministry. I had known Mr Chidambaram as finance minister from my days at the IMF. At that point, I received a call from Dr C. Rangarajan [former RBI Governor and chairman of the prime minister's Economic Advisory Council] asking me if I was interested in doing something here. I had to face the question that at some point every Indian faces- how much are you prepared to contribute to national service? One can talk the talk, but eventually, one has to stop complaining and actually do something,' says Dr Rajan. 'Of course, it was a difficult time in India economically speaking.' He then adds, laughing, 'On the other hand, what better time for an economist to step up when there's a need for change and possibility of change?'

Interestingly, I point out, much of the flak the government got back then was about how an economist-turned-prime-minister had allowed the economy to fall into a shambles.

'Yes,' says Dr Rajan. 'The prime minister was getting a tremendous amount of flak but it's important to understand that at the same time he was willing to absorb it and perhaps react in the right way. I was on a panel, in 2012, with T.N. Ninan and Isher Ahluwalia, talking about how the economy had eroded since the 2007-08 high point of growth and we were complaining about the drift. The fourth person sitting on the dais was Dr Manmohan Singh. He listened to us talk and then told us that he would need to reflect on the matter if everyone was talking about it. He was willing to accept criticism provided it was constructive. I think that's because he was going to start the process of fiscal consolidation which Mr Chidambaram then laid out later in 2012. If we hadn't started that process back then, India could have been in a much more severe crisis when things turned in the global economy a year later.

Excerpted with permission of Penguin India from 'Defining India: Through Their Eyes' by Sonia Singh. Order your copy here.

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