New Delhi/Mumbai: RBI governor Raghuram Rajan’s abrupt decision to quit came as he increasingly felt he lacked support from his political bosses finance minister Arun Jaitley and Prime Minister Narendra Modi, according to friends and colleagues.
A newspaper report a week ago that a selection panel would consider a field of candidates rather than directly offer the former IMF chief economist an extension to his three-year term, effectively forcing him to reapply for his own job, may have been the final straw, according to these people and a finance ministry source.
“He felt it would belittle the position of the RBI governor if he had to appear before the committee,” said one senior commercial banker who knows Dr Rajan personally but had not spoken to him since his decision.
“It would reveal a lack of government support. Rather than have two more years of constant quibbling, he decided to go.” Dr Rajan was also upset that Mr Jaitley had not backed him more strongly after criticism from BJP MP Subramanium Swamy of both his policies and his perceived lack of “Indian-ness”, the sources said.
When Dr Rajan decided to leave, he did so without warning and on his own terms: in a sign of growing tensions he did not inform top members of the government before releasing an open letter to staff on Saturday, a move that took investors and the government by surprise.
Five sources familiar with the matter said Dr Rajan had not contacted Mr Modi’s office directly. Nor was a meeting or discussion between the two planned, said one senior official.
“I am surprised,” said one person who has worked with Rajan and who spoke on condition of anonymity. “A week back he was sounding very much interested in serving a second term.”
Sources in RSS say it was Dr Rajan’s own forays into politically sensitive territory that led the Hindu right to target him — in particular over a speech last October to students in Delhi in which he said that social tolerance was vital for a country’s development.
“It was Modi who protected him for the longest time but the defence wall collapsed when Rajan entered the no-go zone of politics,” one senior RSS official said, speaking on condition of anonymity. Friends also say his family had wanted him to return.