Raghuram Rajan, ace economist and former Reserve Bank governor was in Chennai recently for a board meeting of a new-generation liberal arts university he is promoting, called Krea. Mint caught up with him for a quick chat, probed the buzz about him joining politics soon and asked for his views on the outgoing BJP government. Edited excerpts:
You mentioned in earlier interviews that you will return to India if you get good opportunities. What would define a good opportunity?
Good opportunity is maybe the wrong way to put it. I am saying if there is a need and if I can help in some useful way, I am happy to do it. Sometimes people want advise, and I'm happy to do it.
Like you advised Rahul Gandhi on Nyaay scheme?
With the Congress, more general.
Do you have something against joining politics?
First, my wife has said she will not stay with me if I join politics (smiles).
Do you think it’s too noisy here for your style?
No, no. Politics everywhere is similar. It is not particularly noisy or whatever, I don't have any taste for it. Somebody else can give the speeches and gain the votes.
There are some speculations that you will be a minister if Congress comes to power.
That's too many steps, too far. Unfortunately, given the kind of work that I have done here, there is an expectation that my primary function is in the public arena. No, my primary job is academic. I like the job. I am a reasonably engaged academic. I have written a book recently (“The Third Pillar") which is more intellectual than polemic. So given all that, I am very happy where I am.
But would you consider it if someone offers a public office?
It is a hypothetical question like who will become the king of Sheba? What I said when I resigned— resigned is the wrong word— when my term at the RBI (Reserve Bank of India) came to an end, is that if the need rose at some point, I will be happy to fulfill that need.
Another hypothetical question. If Raghuram Rajan floats a party— Raghuram Rajan Munnetra Kazhagam or Raghuram Rajan Democratic party or Raghuram Rajan Swatantra Party— what will be the main focus of its manifesto?
The answer is very simple. I won't be floating that party. My writings are all out there, you know my views. The point is I have no interest in politics. Absolutely none.
Creating jobs should be first task for any govt, says former RBI Governor Rajan
How will you remember this outgoing government?
We need many more data to come at an absolute conclusion. But in terms of the exceptions of moving the needle of growth— the government came to power on that— it has performed about average. On some level, 7% is what we did for 25 years. So we have not moved the needle unlike what was anticipated. It may be good enough to keep going, 7% is nothing to be sneezed at. Then is it 7% with or without jobs? That is another issue. The underlying theme is that growth has some concerns. Have we changed the kind of economic framework for the world of tomorrow? I’d say no. I’d say this is pretty much the framework we had for a long time. Some concede that as good news. There is continuity in governance. NDA looks a lot like what UPA did— emphasised the same thing like GST, Direct Benefit Transfer, Aadhar. If you tick off all the reforms that have been done, there is a continuity in that. The question again is, is that good news? It goes back to, can we afford the average? And the job situation would suggest that we really need to think about do we need a reboot.
What will be the immediate challenges before the next government?
Whenever any government gets a new lease of life, whether it is the continuing government or a new government, it has to contemplate on the reforms future. One thing we need to think about is, do we have the structures in place for the kind of forces that are getting us? Joblessness is not an Indian phenomenon, it is a phenomenon across the world. It is not that there are no jobs, there are no good jobs. Do we have the economic apparatus to enable us for the next phase of growth? Do we have research forces in various universities that are gonna help industries become a force? I have not seen that. Are we investing in areas of those researches are also not clear. Electric batteries for example. Are we able to take up the jobs that are leaving China? I’d argue, anecdotally, that investors prefer coming to Vietnam, or even some times Bangladesh, than here. So, jobs will be no 1 for any new government.
On jobs, what is your estimate on jobs lost over demonetisation?
Let the past be the past. That is for the politicians to debate. We should look ahead and figure out how do we essentially revive growth. I think the wrong answer is to not talking about it.
Is NYAAY a better way to transfer cash than welfare schemes?
The point of my book is in some sense we need structures around the market to help people live productive lives. In many countries, this includes things like can we provide for education, can we ensure that there is some sort of safety net, some sort of health insurance, so that people have a chance to participate.
Without the structural changes, how is NYAAY going to work? ₹6000 may not provide a child with a decent education in a place where there is no decent school in the first place?
Well, I didn’t announce NYAAY (smiles). The broader point about direct income transfers, which both NDA and UPA has agreed on, is that it can empower people. That doesn’t mean in every place the government will open medical dispensary for the people to be able to buy. But once they have money power, people can go to private dispensary set up. And now that people have money to buy, the medicine be actually there. This is how they will evolve. It is not just about what it will do today. Now, ask me a book question.
Honestly, I have not started reading it.
So then let me make up a book question.
The question you can ask me is the anger in India similar to anger in the West? And my answer to that, some of the forces driving the kind of discomfort in the public in India are similar.
In the West, there is a lot of concern about the availability of middle-income jobs, which are simply not enough. There are well-paid jobs, but people don't get those, simply because many of those jobs would require very strong bachelors or masters degree. And they don't even have a good school. That's similar to the problems here. In some cities, there are fantastic jobs. But we don't have people to fill them. If you don't have a good school, how are you going to get into a good university? It is entirely inequality by birth and this is what they are protesting in the West. So it is where you are, the community you were born into, which determines a lot of what happens. And too many communities don't have the ability to change their situation. To some extent, the answer is what is called more place-based growth network. Let's push more powers and funding down to the community, so that they can actually respond. Some of these direct income transfer schemes are a way of pushing more power directly to the people. Of course, devil lies in the details. You have done attempts of poverty alleviation for so many decades, with very limited results. So we should experiment, carefully.
How is this anger changing society?
The absence of good middle-class jobs tend to have negative effects on the family, especially when you used to have those jobs and you don't have now. It is very hard to manage. Economic decline very quickly leads to social decline. Some of the older areas which could occupy people, such as agriculture, no longer provides sufficient income. And, therefore, some land-owning community, solidly middle-class, no longer can stay middle class with just agricultural income. They are getting very angry, because they are slipping on social security.