Home / Opinion / Online-views /  Five reasons Subramanian Swamy is wrong about Raghuram Rajan

How many erroneous claims can a Harvard economist make in six paragraphs? We present the letter written by Bharatiya Janata Party MP Subramanian Swamy to Prime Minister Narendra Modi asking the latter to remove Raghuram Rajan from the post of Reserve Bank of India governor.

One, Swamy argues that fighting inflation with higher interest rates is disastrous. One country did recently try to reduce interest rates in response to high inflation—Turkey. And what happened there later is well known.

Two, Swamy says that Rajan should have been looking at the trend in wholesale rather than retail prices—but that is precisely the mistake the previous government made after 2010. The result was double-digit inflation, a shift of savings into gold and an eventual rupee crisis.

Three, Swamy claims that small businesses are uniquely hurt by high interest rates—even though the most recent data from the ministry of corporate affairs shows they are doing better than large businesses.

Four, Swamy points to the fact that bad loans have doubled over the past two years as proof of Rajan’s incompetence. Evidently, this is not because banks have been forced to recognize them but because we have a central bank governor who is not Indian in mind.

Five, Swamy pens this gem: “… the consumer price index has not declined because of retail prices". It is like saying rainfall was high because there were good rains.

Modi should ignore this missive.

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