ET Poll: India Inc disagrees with Subramanian Swamy, wants Raghuram Rajan to stay as RBI Governor

MUMBAI: Should Raghuram Rajan quit India? No, is quite simply the overwhelming answer by corporate India, based on a poll of chief executive officers by ET. They have no desire for a Rajan-mukt Bharat, as sought by lawmaker Subramanian Swamy in a letter to Prime Minister Narendra Modi that many have said lacks economic logic.

Ninety per cent of participants said he should get a second term as governor of the Reserve Bank of India, when the current one ends in September. An equally strong majority disagreed with Swamy’s contention that Rajan had destroyed the economy and increased unemployment by refusing to cut interest rates.

The poll of 43 top chief executives from sectors such as retail, telecom and financial services showed that India Inc overwhelmingly supports Rajan despite misgivings about his interest rate policy and the tough action on non-performing bank loans.

About 67 per cent of respondents praised Rajan’s strategy of controlling inflation and money supply first before cutting rates. But 33 per cent felt rates should have been cut faster as inflation is cooling.

Swamy had called on Modi to sack Rajan immediately or not extend his term as he was not "mentally fully Indian" because the widely respected economist kept extending his US green card. The governor is on leave from a teaching job at Chicago’s Booth School of Business.


Swamy told the PM that Rajan — credited with warning about the 2007-08 financial crisis before it happened and reputed as a star among the world’s central bankers — had wrecked the Indian economy and that the concept of containing inflation by raising interest rates was a disastrous one. The letter was written just a few days after Swamy said Rajan should be sent back to Chicago.

Swamy’s tirade has been roundly criticised. About 9,000 readers who participated in an ETMarkets.com survey a few days ago gave all-round support to Rajan and said he should get a second term as RBI governor. Participants in the ET CEO poll said Rajan was following the right approach and that direction is sometimes more important than speed.

"The RBI governor’s approach is to attain macroeconomic stability to be followed by growth. This sounds logical, and he has done a good job," said Rashesh Shah, chairman, Edelweiss Group. "Investors want him to get (an) extension as RBI governor for another two years at least."

Rajan has cut rates by 150 basis points since taking charge in September 2013 but critics have said this pace was too slow, especially with wholesale price inflation in the negative zone for 17 months before turning positive just recently.

"Policy stance should be decided taking a holistic view, not just inflation," said Motilal Oswal, chairman, Motilal Oswal Financial Services. "In a democracy, people can criticise as everyone has a right to express views."

Banks have been slow in cutting rates, but RBI and banking industry officials hope the pace will increase with the shift to the new marginal cost of lending mechanism.

The questions that the CEOs were asked included whether Rajan should go or stay and get an extension, whether he should get a higher post within the government, whether they agreed with the view that he has destroyed the economy and increased unemployment by refusing to cut interest rates faster. They were also asked about Rajan’s strategy to control inflation and money supply first before cutting rates and whether he should have cut rates faster.

The governor has been praised for ensuring stability in India with an unwavering focus on inflation amid volatility in the global economy. He has also criticised other central banks for taking steps that appear to benefit their own countries rather than taking a more holistic view.