It is unfortunate that Subramanian Swamy has demanded the sacking of RBI Governor for his failure to cut interest rates. Perhaps Swamy is unaware about the work done by Rajan to improve Indian economy. Repo rate is at 6 year low of 6.5 %. The Governor is in periodical consultation with FM and on his assurance of maintaining fiscal deficit at 3.9%, Rajan reduced the rate on April 16 by 25 bps though economists thought that there was no scope for a rate cut. Swamy never exhibited the minimum courtesy while making statements and that may be due to an aberration in his DNA. You can sack a minister or a bureaucrat if he is corrupt, but not for not lowering rates.
This is colossal. Every public sector bank is so deep in the red that it is bleeding everywhere. Where does all this lead to? When the government and RBI are struggling to find ways to recapitalize banks to meet the stringent capital standards of Basel lll recommendations , this kind of staggering NPAs and huge provisioning are eating into capital and reserves built till now. RBI needs to have a Governor like Rajan in the saddle for one more term under these torrid times whatever be the opposition to his continuance in political circles. Fiscal dynamics are guided by many factors such as global recession, demands and supply rate of the country, which may impact the manufacturing sector. There is no doubt that Rajan was instrumental in reviving Indian economy and deserves all praise.
Jayanthi S. Maniam
(The views expressed by the author in the article are his/her own.)