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Raghuram Rajan: God of wealthy and speculative India
Raghuram Rajan has been appointed the new governor of Reserve Bank of India. His appointment has been welcomed by wealthy and speculative India. Raghuram Rajan is a neo-liberal. He can raise market capitalization of the Indian stock exchange but he can do nothing to help the Aam Admi.

The appointment of Raghuram Rajan as Governor of the Reserve Bank of India has been widely welcomed by the industry and the financial institutions. The Sensex rose 412 points on the day he took over. The Rupee rose 106 paise to the US dollar to close at Rs 66.01. It is only to be expected. 

Rajan with his IMF background is a Neo-liberal economist. So he is expected to be more pro industry, pro multinational, pro investors, and pro-economic liberalization which essentially means less control and supervision of the activities of banks and financial institutions. Let us look at some of the measures he has promised to take.

Banks Overseas Borrowing Limit has been Doubled: The bank's borrowing limit has been doubled to 100 % of Tier-I capital. If borrowing could solve long term financial problems (India has had a trade deficit since independence and a Current Account Deficit for most of its 66 years of independence), there would be no financial problem in the world. How will they pay back the loans? Of course this will be done by borrowing some more.

Banks Provision for CRR and Statutory Liquidity Ratio to be Cut: This step will make banks more vulnerable to crash as in 2007. But who cares? The poor depositors will loose their all hard  earned moner. Companies have limited liabilities. The wealthy have enough to bear these pinpricks.

More Leeway for Foreign Banks: I do not understand what it means. Perhaps wealth management and money laundering will be allowed on a larger scale.

Liberalization of Markets and Allowing Speculation: This is also not clear. Some suggest that it hints at removal of restrictions on Indian banks from taking positions on currency futures. The Commodity Exchange in India is already in default. Millions of small investors are regularly cheated by chit funds and multilevel marketing companies. But that is not a concern for the government which is of the rich, by the rich and for the rich.

Use of GDP for Economic Planning:  Producing one quintal of rice, two bottles of whiskey, consuming 20 liters of petrol produce the same GDP. A foreign investment of Rs 1500 in the stock market will also produce the same GDP. Are they equally beneficial to the society? Do they generate equal employment?

Conclusion: Mr. Raghuram Rajan is a God of the Virtual World. He can increase the market capitalization of our stock exchanges. He can make banks more vulnerable to economic crisis in the world. But he cannot save the Rupee as the price of the rupee is based on demand and supply of dollars. That situation is not going to improve unless we reduce imports by raising import duties and taking other protectionist measures.

The only way to save the Rupee is to follow a fixed exchange rate like China. Mr. Rajan cannot control prices which are governed by the price of fuel and speculative hoarding. He is not the God of Aam Admi.

India has been following neo-liberal policies for 22 years. During this period the Rupee has fallen from Rs 15.50 to Rs 66 to the dollar. During this period diesel prices have risen from Rs 6.11 to a liter to Rs 60 to a liter. Neo-liberal trickle down policies will not benefit the Aam Admi. Going back to socialistic policies like adopting a fixed exchange rate and increasing the role of public sector in India will.

The Government of India behaves like the Zamindars of Bengal. Their income was not enough to meet the cost of their lavish lifestyles. They borrowed and to repay the loans they sold all their lands and belongings and became paupers.

The Government of India lives on borrowed money; both dollars and rupees. They have started selling the public sector units. What will they sell thereafter; cities; towns and states?

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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