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Posted By Sreedhar Pillai at Monday, September 23, 2013||PERMALINK Labels: #lrose, India, Raghuram Raja, RBI Governor, Somerset Maugham
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Can't blame Raghuram Rajan, the new Governor of the Reserve Bank Of India, for springing a surprise on everyone concerned with the Indian stock markets and the growth of Indian economy by hiking the interest rate instead of lowering it.
Every sensible Indian who is able to think for himself and even a little for his country would do the same if he or she were in the RBI Governor's shoes.
It may not be rocket science the Indian Media and financial market has started to expect from a financial whiz who is famously credited with correctly predicting the last world financial crisis, but it certainly smacks of a well thought out political strategy, in resonance with the need of the hour and the ruling government.
If the media, especially the Indian set up which struggle to prove to be a biting one has failed to see the truth, it is because their myriads of persons touting a mike with a satellite dish at the other end, somehow forget to ask the right questions at the right time.
It may be an understandable lapse, especially when the celebrity they are facing is someone as charismatic and charming as the young RBI governor who seems to have turned the press meet to be an occasion more glamorous than the latest Bollywood release of a super star.
How else can you explain why none of the media persons and expert reporters at the Governor's press meet raised the question with Rajan if his measure had anything to do with the impending state elections?
Reuters have sited analysts explaining out the governor's action as "interesting experiment".
However, the Governor's actions seem to be only the beginning of a well thought out strategy which goes beyond economic policy."I am not saying whether I know it will work or not, but I think it sort of shows the RBI's hand in the sense that they really want to focus more on the inflation side of things than on growth at this point."
At his first-day press conference on assuming charge of the RBI Rajan had hinted at a comprehensive action plan to bolster the rupee and strengthen financial markets but also joked his job was not to accumulate "likes" on Facebook.
Somerset Maugham once said If a nation values anything more than freedom, it will lose its freedom, and the irony of it is that if it is comfort or money that it values more, it will lose that too.
Whether Raghuram Rajan ever read any of Maugham, he seems to have had some similar insight guiding his actions when he accepted his new post as the Governor of the RBI. Why else should he take some steps which has wiped out a large chunk of capital off the market in a few minutes, when country's Industrial lobby had been hankering for concession in the name of growth.
Rajan seems to believe that by harnessing and clamping inflation for once, he can bring the much needed stability to the economy, which as an ex IMF economist he knows is what the foreign investors love. But doing that now has also advantages which are not strictly financial, at the least.
For one thing, a lower steady inflation over a few months leading up to any election is what the voters like. On the other, there is no big merit in fattening up a lobby working against the government just before the elections, giving it additional clout, especially when things can wait until after the general elections.
The proof of the pudding in this occasion is the lack of visible whining from the North Block about the Governor's action. It was only a short while ago statements like "if we have to, we will walk alone" emanated from the Finance Minister when RBI actions did not meet its expectations.
One thing was clear from his "tounge in cheek" responses punctuated by disabling smiles and jokes at the press meet. Rajan was seriously wondering why no one was raising the obvious question he would have found so difficult to answer. Has it got anything with the coming elections ?
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