RBI Governer Raghuram Rajan clarifies on controversial remark

PUNE: Reserve Bank of India Governor Raghuram Rajan cautioned that being the world’s fastest-growing major economy shouldn’t breed complacency, setting in context his remark that “in the land of the blind, the one-eyed man is king”. The latter comment, made recently in the US about India’s growth in the backdrop of global economic uncertainty, appears to have hit a political nerve.

“Growth… is just one measure of performance,” Rajan told students graduating from the National Institute of Bank Management in Pune on Wednesday. “The level of per capita GDP is also important. We are still one of the poorest large countries in the world on a per capita basis, and have a long way to go before we reasonably address the concerns of each one of our citizens.”

He compared the country’s record with that of its northern neighbour, the world’s fastest-growing economy until being overtaken by India.

“We are often compared with China. But the Chinese economy, which was smaller than ours in the 1960s, is now five times our size at market-exchange rates,” he said. “The average Chinese citizen is over four times richer than the average Indian. The sobering thought is that we have a long way to go before we can claim we have arrived.”

As head of RBI, he needed to have a clear-eyed, non-triumphalist view. “As a central banker who has to be pragmatic, I cannot get euphoric if India is the fastestgrowing large economy.

Our current growth certainly reflects the hard work of the government and the people of the country, but we have to repeat this performance for the next 20 years,” Rajan said. “We cannot get carried away by our current superiority in growth, for as soon as we believe in our own superiority and start distributing future wealth as if we already have it, we stop doing all that is required to continue growing… This movie has played too many times in India’s past for us to not know how it ends.”

He also made the point that attempting to get to the literal meaning of every phrase uttered by a public figure would stifle debate.

“My intent was to signal that our outperformance was accentuated because world growth was weak, but we in India were still hungry for more growth,” Rajan told the students. “I then explained that we were not yet at our potential, though we were at a cusp of a substantial pickup in growth given all the reforms that were underway.”

Rajan’s use of the metaphor had prompted Congress member Mani Shankar Aiyar to wonder whether the governor was referring to Prime Minister Narendra Modi.

Commerce Minister Nirmala Sitharaman made clear her view on the comment. “I may not be happy with his choice of words. I think whatever action is being taken by this government is showing results,” Sitharaman said.

“FDI (foreign direct investment) is improving, there are clear signs that manufacturing sector is reviving. Inflation, current account deficit is under control.”

When Rajan’s remark was put to him, Finance Minister Arun Jaitley said: “Compared to the rest of the world, we are growing much faster, in fact the fastest. Compared to our own potential, we can do better.”


(With reporting by Reuters)