Delhi MCD Election Results 2017

Source: media reports

Has Raghuram Rajan lost out on a second term?

Raghuram Rajan’s speech last week has set tongues wagging that he is unlikely to serve a second term, an Ambit Capital report claims


Raghuram Rajan’s ‘one-eyed king’ comment last week set off a social media furore. Photo: Abhijit Bhatlekar/Mint
Raghuram Rajan’s ‘one-eyed king’ comment last week set off a social media furore. Photo: Abhijit Bhatlekar/Mint

Mumbai: Speculation is rife that the Reserve Bank of India (RBI) governor Raghuram Rajan’s “one-eyed king” comment last week that set off a social media furore could reduce his odds of getting a second term at the central bank’s helm, according to a report by brokerage firm Ambit Capital.

“The RBI governor’s speech last week has set tongues wagging in Delhi with the emerging consensus being he is unlikely to serve a second term,” the report claimed.

Rajan, in an interview to financial news website Marketwatch on 17 April, had said that India’s economic growth stands out because of a rather subdued growth elsewhere, in response to a question about the country being a bright spot in an otherwise gloomy global economy.

“Well, I think we’ve still to get to a place where we feel satisfied. We have this saying, ‘in the land of the blind, the one-eyed man is king’. We’re a little bit that way,” Rajan had told the website.

The comment generated comments on social media with commerce minister Nirmala Sitharaman openly criticizing Rajan. “I may not be happy with his choice of words. I think whatever action is being taken by this government is showing results. FDI is improving, there are clear signs that manufacturing sector is reviving,” Sitharaman had said, according to a The Times of India report.

On Wednesday, Rajan clarified his remark and defended the thought process behind it that has attracted controversy.

The RBI governor also spoke of how “words are hung out to dry, as in a newspaper headline”, robbing them of context and opening them up to misinterpretation.

“This tit-for-tat has obviously ignited speculation in Delhi about the most important role after the finance minister in the Indian financial ecosystem,” Ambit analysts Ritika Mankar Mukherjee and Sumit Shekhar said in the note.

Ambit analysts said that their discussions on Wednesday with policy experts in Delhi suggest that the candidates in the fray to replace Rajan are Arundhati Bhattacharya, chairman of State Bank of India; finance secretary Shaktikanta Das; U.K. Sinha, chairman of the Securities and Exchange Board of India; and Urijit Patel, deputy governor of the central bank.

“Whilst some of these contenders bring to the table superior banking-related experience than Dr. Rajan, our main worry emanates from the fact that a non-economist RBI governor may not possess the intellectual bandwidth required to manage the currency at a time when the US is considering rate hikes,” Ambit said in the note.

“This may expose the Indian rupee to the risk of extreme volatility as was the case in the months leading to Raghuram Rajan’s appointment as RBI governor,” Ambit added.