raghuram rajan second term india inc jaitley modi sub swamy controversy rbi
The Narendra Modi government did not accept Raghuram Rajan's demands of elevated status for the RBI governor's post and deputy governors. In Picture: India's Prime Minister Narendra Modi gestures to Reserve Bank of India (RBI) Governor Raghuram Rajan at an event on financial inclusion in Mumbai April 2, 2015 (Representational image).Reuters file

Raghuram Rajan did not decide on quitting the Reserve Bank of India (RBI) in a huff. It went beyond the personal attacks by Subramanian Swamy — BJP leader and recently-appointed Rajya Sabha member — and started in March last year.

Much before Swamy publicly sought Rajan's ouster, the Narendra Modi government had shot down many of the central bank governor's "demands," making Rexit (Rajan's exit) a fait accompli. To add to the deteriorating situation, a senior Modi government minister rebuked Rajan in public. 

What were his "demands"? 

The apex bank governor wanted the status of cabinet rank for the RBI governor's post and minister of state rank for deputy governors. The Indian Express, citing finance ministry sources, said the Modi government did not acknowledge these "demands." When Prime Minister Narendra Modi did not give such status even to the national security advisor and principal secretary, the question of according such status to senior RBI officials did not arise, the daily added.

Fallout of his "one-eyed king in a land of the blind" comment

When Rajan made the comment in the context of India growing impressively amid a weak global environment, little did he realise that it would be met with backlash by Modi ministers. The problem for him started when former finance minister P Chidambaram agreed with his views, evoking a rebuttal from Nirmala Sitharaman, minister of state for commerce and industry. 

The strong disagreement to Rajan's comment — "Well, I think we've still to get to a place where we feel satisfied. We have this saying, "in the land of the blind, the one-eyed man is king." We're a little bit that way — in an interview to MarketWatch forced him to clarify a few days later, but by that time, the damage was done.

"In our news-hungry country, however, our domestic papers headlined the phrase I used. To be fair, they also offered the surrounding context, but few read beyond the headline. So the interview became moderately controversial, with the implication that I was denigrating our success rather than emphasizing the need to do more," was his clarification, but it did not help.

RSS outfit unimpressed 

Rajan's American background and his long stint at the International Monetary Fund (IMF) found few takers in the RSS, the BJP's politicial wing. His policies were questioned by BJP leader Subramanian Swamy and Swadeshi Jagran Manch co-convenor S Gurumurthy, the Indian Express said.

The final hit 

Contrary to the widely-believed notion that Swamy's personal attacks on Rajan and the feeble opposition to such remarks by Finance Minister Arun Jaitley influenced Rajan's decision, the Modi government's reported move to form a panel to short-list candidates for selecting the RBI governor was the proverbial last straw.  

"He felt it would belittle the position of the RBI governor if he had to appear before the committee," Reuters quoted a senior commercial banker who knew Rajan personally.

"It would reveal a lack of government support. Rather than have two more years of constant quibbling, he decided to go," he added.

Colleague surprised at Rajan's decision

Rajan made up his mind very late, according to the agency's report. "I am surprised. A week back he was sounding very much interested in serving a second term," Reuters quoted a person who has worked with Rajan, as saying. 

Also read