Jumping the Gun on Rajan?

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The newly appointed RBI Governor Raghuram Rajan enters the RBI headquarters in Mumbai. PTI Photo by Shirish Shete
The newly appointed RBI Governor Raghuram Rajan enters the RBI headquarters in Mumbai. PTI Photo by Shirish Shete

Optimism is good. But it should be grounded in reality especially when it comes to the current economic environment. In the last two days, if one believes India Inc it has all suddenly transformed. A week ago corporate CEOs were ready to pack their bags and leave. A week later surveys suggest the worst is over. Optimism has made a quick entry while doomsdayers a hurried exit. One wonders if all this is because of good timing and genuine optimism or is it because of change in guard at the Reserve Bank of India?

There are questions we must ask ourselves. Has this truly happened with the change of one man at the helm of India’s central bank? Are we getting ahead of ourselves with quick fix notions of economic change? Or were we so desperate for someone to take charge and talk up the mood that 48 hours are being talked about as game changing? Somehow from pink papers to television tickers, all reflect a teenage infatuation with a new occupant at the RBI’s corner room. One should not forget the halo Mr Chidambaram returned to the North Block a year and a half ago. Today many say he failed to infuse any enthusiasm or action in the Indian economy.

There is no doubting Raghuram Rajan’s ability to come up with appropriate measures that can mend the economy’s troubles. His initial attempt to provide clarity and communicate with the markets is clearly a good start. Some steps that he announced may work and yield results indicating that he means business. But it doesn’t serve his cause or surely the Indian economy’s if we start celebrating the spike in the stock markets and recovery in rupee as the return of good times. In the past the same markets have continued to surge even as the economy has slumped and jobs creation has suffered. So if anything the market’s reaction to Raghuram Rajan should be at best seen as a gasp of relief rather than beginning of a new phase of growth. Sentiment play is good but since when have we been able to solve deep rooted structural issues such as land laws, labour issues, job creation and reviving investment by industry by looking at the stock ticker? Can we afford to use Raghuram’s housewarming on Mint Street to once again ignore the real problems the Indian economy faces?

Let’s not forget the more we pump iron, the higher we place Raghuram’s ‘rockstar’ and James Bond image, the same media will drop him like a hot potato and run headlines that question his intention or call him a ‘me too’ in the long list of north-blockers who made it to RBI and soon realised a voice of their own. A voice that attempted to separate economics from politics.

Flip flop isn’t just about going back and forth on policies alone. Giving into sentiment and playing to the gallery can very much be interpreted as the same by those who view the Indian economy with seriousness.

As someone quipped if changing one man at the RBI can release such market energies then why not try that with the government. But in this phase of soul searching within the economy, let’s not get ahead of ourselves and instead find a voice of reason.

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