Tag: Raghuram Rajan | Page 2

19 July, 2016

Why Inflation Cannot Be a Growth Strategy

In the recent past it has been suggested that some amount of inflation cannot be bad in order to get economic growth going again. Hence, the Reserve Bank of India(RBI), should cut the repo rate in order to get the economic growth going.

Repo rate is the rate at which RBI lends to banks. The hope is that when the RBI cuts the repo rate, banks will also cut their lending rates. At lower rates both individual consumers as well as firms will borrow and spend more. And this will get economic growth going again. (As I have said in the past individual consumers are already borrowing at a record pace even at the so called high interest rates).

How does this work? As RBI governor Raghuram Rajan had explained in a February 2014 speech: “By raising interest rates, the RBI causes banks to raise rates and thus lowers demand; firms do not borrow as much to invest when rates are higher and individuals stop buying durable goods against credit and, instead, turn to save. Lower demand growth leads to a better match between demand and supply, and thus lower inflation for the goods being produced, but also lower growth.”

When RBI cuts the repo rate this trend reverses. As Rajan explained: “Relatedly, if lower rates generate higher demand and higher inflation, people may produce more believing that they are getting more revenues, not realizing that high inflation reduces what they can buy out of the revenues. Following the saying, “You can fool all the people some of the time”, bursts of inflation can generate growth for some time. Thus in the short run, the argument goes, higher inflation leads to higher growth.”

The trouble is that this inflation eventually catches up with growth. As Rajan said: “As the public gets used to the higher level of inflation, the only way to fool the public again is to generate yet higher inflation. The result is an inflationary spiral which creates tremendous costs for the public.”

Hence, it is important that inflation stays in control, if a country is looking for strong growth over a long period of time. (As I had explained in a column last week).

Inflation as per the consumer price index has started to go up again. For June 2016, the inflation was at 5.77 per cent. In comparison, the inflation in June 2015 was at 5.40 per cent. One reason for this jump has been food inflation. Food inflation in June 2016 was at 7.79 per cent. Within food, vegetables, pulses and sugar, saw an increase in price of 12.72 per cent, 28.28 per cent and 12.98 per cent, respectively. Spices went up by 8.13 per cent. Food items constitute 54.18 per cent of the consumer price index. Food inflation impacts poor the most given that a bulk of their income goes towards paying for food.

As is obvious, the jump in inflation as per consumer price index has been due to a rise in food inflation. The RBI cannot do anything about food prices through the repo rate, and hence, the RBI should cut the repo rate, or so goes the argument.

In the 2014 speech Rajan had explained this by saying: “I want to present one more issue that has many commentators exercised – they say the real problem is food inflation, how do you expect to bring it down through the policy rate? The simple answer to such critics is that core CPI inflation, which excludes food and energy, has also been very high, reflecting the high inflation in services. Bringing that down is centrally within the RBI’s ambit.”

So RBI cannot control food inflation but it can control the prices of other items that make up the consumer price index, through its monetary policy. In fact, the RBI can control, what economists call the “second round effects”.

Economist Vijay Joshi explains this in his new book India’s Long Road—The Search for Prosperity: “What sparks inflation is quite different from what keeps it on the boil. Though a supply shock raises the price of, say, food or oil products, this leads to a persistent rise in the overall price level only if it spreads and gathers strength due to the pressure of aggregate demand. If the economy is ‘overheated’, the inflation impulse becomes too generalized. A wage-price spiral can then develop that is hard to break, especially if people begin to expect higher inflation and increase their wage and salary claims in order to protect their real incomes.”

And this is where monetary policy and the central bank come in. As Joshi writes: “To prevent these ‘second-round effects’, monetary policy has to keep excess demand and inflationary expectations under check.”

Hence, while the RBI cannot control food prices, its monetary policy can have an impact on other elements that constitute the consumer price index. And this explains why the core-inflation (prices of products other than food and fuel) in June 2016 cooled to down 4.5 per cent. It was at 4.7 per cent in May 2016. This, despite the fact that food inflation is close to 8 per cent.

In fact, Rajan explained this beautifully in a June 2016 speech where he said: “The reality is that while it is hard for us to control food demand, especially of essential foods, and only the government can influence food supply through effective management, we can control demand for other, more discretionary, items in the consumption basket through tighter monetary policy. To prevent sustained food inflation from becoming generalized inflation through higher wage increases, we have to reduce inflation in other items. Indeed, overall headline inflation may have stayed below 6 percent recently even in periods of high food inflation, precisely because other components of the CPI basket such as “clothing and footwear” are inflating more slowly.”

Given that this is not such a straightforward point to understand, many people fall for the inflation is good for growth and that RBI cannot control inflation, arguments.

The column originally appeared in Vivek Kaul’s Diary on July 19, 2016

12 July, 2016

Mr Stiglitz, India’s Obsession with Inflation is Correct

Joseph Stiglitz, a Nobel prize winning economist, had some advice for Indian policymakers last week. Speaking in Bangalore, Stiglitz said: “Excessive focus on inflation almost inevitability leads to higher unemployment levels and lower growth and therefore more inequality.”

The point that Stiglitz was making is that the government of India should spend more than it currently plans to. Further, the Reserve Bank of India(RBI) should cut interest rates further and encourage people to borrow and spend more. Of course, all this extra spending will lead to some inflation, with more money chasing the same quantity of goods and services. But that will be a small price to pay for economic growth. This economic growth will lead to lower unemployment and in the process lower inequality.

This is precisely the kind of argument that was made during the Congress led United Progressive Alliance(UPA) regime, to justify the high rate of inflation that prevailed between 2008-2009 and 2013-2014.

The trouble is that there is enough evidence that suggests otherwise. Over the last five to six decades, countries which have grown at a very fast pace, have had very low rates of inflation.

As Ruchir Sharma writes in The Rise and Fall of Nations—Ten Rules of Change in the Post-Crisis World: “The miracle economies like South Korea, Taiwan, Singapore, and China, which saw booms, lasting three decades or more, rarely saw inflation accelerate to a pace faster than the emerging market average. Singapore’s boom lasted from 1961 to 2002, and during that period inflation averaged less than 3 percent.”

The same is the case with China. As Sharma puts it: “In China, the double digit GDP growth of the last thirty years was accompanied by an average inflation of around 5 percent, including an average rate of around 2 percent over the decade ending in 2010. China saw a brief surge in inflation in 2011, and economic growth in the People’s Republic has been slumping steadily since then.”

The point is very clear, inflation is not good for economic growth. There is enough evidence going around to show that. The same can be said in the Indian case as well, when the inflation surged between 2008-2009 and 2013-2014. It ultimately led to economic growth collapsing.

Year	Inflation (in %)	Economic Growth (in %)
2007-2008	6.2	9.32
2008-2009	9.1	6.72
2009-2010	12.37	8.59
2010-2011	10.45	8.91
2011-2012	8.39	6.69
2012-2013	10.44	4.47
2013-2014	9.68	4.74

In 2007-2008, inflation was at 6.2 per cent and the economic growth came in at 9.32 per cent. In the aftermath of the financial crisis that started in 2008-2009, the union government increased its expenditure in the hope of ensuring that the economic growth did not collapse.

The government expenditure budgeted for 2008-2009 was at Rs 7,50,884 crore. The final expenditure for the year was at Rs 8,83,956 crore, which was around 17.8 per cent higher. The expansive fiscal policy led to inflation, which in turn led to lower economic growth in the years to come.

The increased government spending led to high inflation in the years 2009-2010 and 2010-2011, but at the same time it also ensured that economic growth continued to stay strong in the aftermath of the financial crisis. Nevertheless, high inflation ultimately caught up with economic growth and it fell below 5 per cent during 2012-2013 and 2013-2014.

The point being that extra spending and lower interest rates leading to inflation might help bump up economic growth in the short-term, but over the longer term it clearly does not help. What made the situation even worse was that RBI did not get around to raising interest rates as fast as it should have.

As Vijay Joshi writes in India’s Long Road—The Search for Prosperity: “Since fiscal policy was expansive, the job of demand-side inflation control was left to the RBI. Given the strength of both demand and cost-push forces, monetary policy would have had to be tough to be effective. Put bluntly, the RBI muffed it. It took a softly-softly approach to raising interest rates. While this may perhaps have been understandable because it feared hurting investment and growth, it is surely no surprise that inflation proved to be persistent.”

High inflation also leads to a situation where the household financial savings fall. This is precisely how things played out in India. Between 2005-2006 and 2007-2008, the average rate of household financial savings stood at 11.6 per cent of the GDP. In 2009-2010, it rose to 12 per cent of GDP. By 2011-2012, it had fallen to 7 per cent of the GDP. In 2014-2015, the ratio had improved a little to 7.5 per cent of GDP.

Household financial savings is essentially a term used to refer to the money invested by individuals in fixed deposits, small savings schemes of India Post, mutual funds, shares, insurance, provident and pension funds, etc. A major part of household financial savings in India is held in the form of bank fixed deposits and post office small savings schemes.

A fall in household financial savings happened because the real rate of return on deposits entered negative territory due to high inflation.

This led to a situation where savers have moved their savings away from deposits and into gold and real estate. As RBI governor Raghuram Rajan said in a June 2016 speech: “In the last decade, savers have experienced negative real rates over extended periods as CPI has exceeded deposit interest rates. This means that whatever interest they get has been more than wiped out by the erosion in their principal’s purchasing power due to inflation. Savers intuitively understand this, and had been shifting to investing in real assets like gold and real estate, and away from financial assets like deposits.”

If a programme like Make in India has to take off, low household financial savings cannot be possibly a good thing. This hasn’t created much problem in the recent past, simply because bank lending to industry has simply collapsed. Banks (in particular public sector banks) are not interested in lending to industry because industry has been responsible for a major portion of bad loans in the last few years.

But sooner or later, this situation is going to change. And then the low household financial savings ratio, will have a negative impact and push interest rates up. In this scenario, it is important that inflation continues to be under control and the real rates of return on deposits continue to be in positive territory. That is the only way, the household financial savings ratio is likely to go up.

As Joshi puts it: “In today’s world of low inflation, India’s long-run inflation target should certainly be no higher than 4 or 5 per cent a year.” And that is something both the RBI as well as the union government should work towards achieving and maintaining.

The column originally appeared in Vivek Kaul’s Diary on July 12, 2016

23 June, 2016

It’s Not the Interest Rate, Stupid

This week there has been an overdose on Raghuram Rajan, the governor of the Reserve Bank of India(RBI) and his decision to not take on a second term. I guess some readers haven’t liked that. Nonetheless, it is important to discuss his ideas and thoughts, given that this is an opportunity to explain some basic economics, which many people don’t seem to understand.

I don’t blame them given the surfeit of reading material that is generated these days. I get many WhatsApp forwards with spectacularly illogical conclusions and many people seem to believe in them. One of the theories going around these days is that Rajan did not cut interest rates fast enough, and this impacted both businesses as well as consumers.

I have tried to counter this argument over the last one week in different ways. But given that I have limited access to data, some questions still remained unanswered. Governor Rajan though does not have these limitations. In his latest speech, made in Bangalore, yesterday, he explained in his usual simple style, as to why interest rates weren’t slowing down bank lending.

But before we get down to that, I would like to discuss something else.

In one of the many columns written to justify Rajan’s decision of not taking on a second term, BJP member and newspaper editor Chandan Mitra, wrote: “Rajan’s emphasis on increasing savings fell on deaf ears because the middle class was by now impatient to spend, not save.”

The insinuation here is that if Rajan had cut interest rates fast enough, the middle class would have borrowed and spent. This would have reinvigorated the Indian economy. But then the Indian economy grew by 7.6% in 2015-2016. It is fastest growing major economy in the world. So, I really don’t what Mitra was cribbing about. Also, Rajan has cut the repo rate by 150 basis points since January 2015.

Rajan in his speech made it clear through data that interest rates hadn’t held back bank lending. As he said:“The slowdown in credit growth has been largely because of stress in the public sector banking and not because of high interest rate.” Take a look at the following chart.

Chart 1 : Non food credit growth Chart1 Non Food credit growth

The yellow line shows the overall lending growth of the new generation private sector banks (Axis, HDFC, ICICI, and IndusInd) over the last two years. What this shows very clearly is that the lending growth of new generationprivate sectors banks has had an upward trend with a few small blips in between.

In contrast the lending growth of public sector banks (the blue line) has slowed down considerably over the last two years. Let’s look at the bank lending growth in a little more detail. The following chart shows the bank lending growth to industry over the last two years.

Chart 2 : Credit to industry Chart 2 Credit to Industry

As can be seen from the above chart, the lending to industry, carried out by the new generation private sector banks has been robust. In fact, in the last one year, it has grown by close to 20%. Hence, the new generation private sector banks have been lending to industry at a very steady pace.

When it comes to public sector banks, the same cannot be said. The lending growth has been falling over the last two years. Now it is in negative territory. In fact, due to this, the overall lending by banks to industry in the last one year was at just 0.1%. The figure was at 5.9% between April 2014 and April 2015. A similar trend can be seen from the following chart when it comes to lending to micro and small enterprises.

Chart 3 : Credit to Micro and Small Enterprise Chart 3 Credit to Micro & Small Enterprices

This has led many people to believe that high interest rates have slowed down bank lending. As Rajan put it:“The immediate conclusion one should draw is that this is something affecting credit supply from the public sector banks specifically, perhaps it is the lack of bank capital.”

But as I have mentioned in the past, both public sector banks as well as private banks, have been happy to lend to the retail sector or what RBI calls personal loans.

These include home loans, vehicle loans, credit card outstanding, consumer durable loans, loans against shares, bonds and fixed deposits, and what we call personal loans. As I have mentioned in the past, retail loans have grown at a pretty good rate in the last one year.

The retail loans of banks have grown by 19.7% in the last one year. Between April 2014 and April 2015(between April 18, 2014 and April 17, 2015), these loans had grown by 15.7%. Hence, the retail loan growth has clearly picked up over the last one year. What is interesting is that in the last one-year retail loans have formed around 45.6% of the total loans given by banks (i.e. non-food credit). Interestingly, between April 2014 and April 2015, retail loans had formed 32.4% of the total lending.

This is precisely the point that Rajan made in his speech. Take a look at the following chart:

Chart 5 : Personal Loans Chart 5 Personal Loans

In this graph, the retail ending growth of public sector banks and new generation private sector banks has been plotted. As can be seen, the two curves are almost about to meet. What this tells us is that when it comes to lending to the retail sector, the public sector lending growth is almost as fast as the new generation private sector bank. And given that the public sector banks are lending on a bigger base, they are carrying out a greater amount of absolute lending.

As Rajan put it in his speech: “If we look at personal loan growth (Chart 5), and specifically housing loans (Chart 6), public sector bank loan growth approaches private sector bank growth. The lack of capital therefore cannot be the culprit. Rather than an across-the-board shrinkage of public sector lending, there seems to be a shrinkage in certain areas of high credit exposure, specifically in loans to industry and to small enterprises. The more appropriate conclusion then is that public sector banks were shrinking exposure to infrastructure and industry risk right from early 2014 because of mounting distress on their past loan.”

This isn’t surprising given that banks are carrying a huge amount of bad loans on lending to industry. As the old Hindi proverb goes: “Doodh ka jala chaach bhi phook-phook kar peeta hai – Once bitten twice shy.”

As I have mentioned in the past, in case of the State Bank of India, the gross non-performing ratio (or the bad loans ratio) of retail loans for 2015-2016 was at 0.75% of the total loans given to the retail sector. This came down from 0.93% in 2014-2015.

The bad loans ratio of large corporates has jumped from 0.54% to 6.27%. The bad loans ratio of mid-level corporates has jumped from 9.76% to 17.12%. And the bad loan ratio of small and medium enterprises has remained more or less stable and increased marginally from 7.78% to 7.82%. This is a trend seen across public sector banks. Hence, it isn’t surprising that public sector banks do not want to lend to the industry, at this point of time.

Take a look at the following chart, which plots the home loan lending growth of public sector banks and new generation private sector banks.

Chart 6 : Housing Loans Chart 6 Housing Loans

In this case, the lending growth of public sector banks is as fast as the lending growth of new generation private sector banks.

What all this tells us very clearly is that when it comes to the retail segment, public sector banks are lending as much as they can. This refutes Mitra’s point where he said that the middle class isn’t borrowing and spending because of high interest rates. If middle class wasn’t borrowing and spending, retail lending wouldn’t have grown by close to 20%, in the last one year.

In fact, credit card outstanding of banks has grown by 31.2% in the last one year, after growing by 22.9% between April 2014 and April 2015. So, I have really no clue as to what is Mitra talking about. Vehicle loans have grown by 19.7% against 15.4% earlier. Guess, it’s time he opened a few excel sheets before just mindlessly commenting on things.

Rajan summarised it the best when he said: “These charts refute another argument made by those who do not look at the evidence – that stress in the corporate world is because of high interest rates. Interest rates set by private banks are usually equal or higher than rates set by public sector banks. Yet their credit growth does not seem to have suffered. The logical conclusion therefore must be that it is not the level of interest rates that is the problem. Instead, stress is because of the loans already on public sector banks balance sheets, and their unwillingness to lend more to those sectors to which they have high exposure.”

To conclude, and with due apologies to Bill Clinton, “It’s not the interest rate, stupid!”

The column originally appeared on the Vivek Kaul’s Diary on June 23, 2016

22 June, 2016

An Open Letter from an Indian Crony Capitalist

(This is a spoof)

Dear Indian Citizen,

Kem cho?

Kaamon Achish? Maja ma?

Hope all is well with you.

I am very happy these days. You know with that Rajan guy deciding to go back to Chicago. Good he is going back there.

I to wanted to open a champagne bottle to celebrate. But these children of mine always want this red wine shine.

And I to am still wondering, why would anyone in their right mind, comeback to India from the United States? Okay, maybe Chicago is very cold. My deekro tells me, they call it the windy city. It’s very cold up there it seems.

But then why stay on the East Coast? He could easily move to the West Coast. California. This Rajan guy. Very sunny, I am told. Just like Mumbai it is.

You know, when he was appointed as the RBI Governor, I got my kudi to buy all his books from this Amazon. Or was it Flipkart? I don’t remember. Been a long time since I went to the Strand Book Stall, you see.

So, this Rajan guy has written just two books, it seems. What men, been in the United States for nearly three decades and written just two books? Look at our very own Chetan. He has written so many more books than Rajan while holding a proper banking job at the same time, for a very long time.

And Rajan could write only two, with a teaching job?

So, one book of his is called, Saving Capitalism from the Capitalists. I started the book with great interest, after all I am also capitalist. But all the economic theory-weory got to me finally. And he just kept talking about Mexico. Our Chetan is so much better. North-South love story he wrote. What fun it was.

Didn’t Rajan also marry a North Indian? Why didn’t he write about that then and call it I too Had a Love Story? There is enough trouble in life anyway. Why write about such heavy stuff? And that is why I like watching this Tarak Mehta ka Oolta Chashma.

Oh talking of Mexico. Have you seen this latest Hindi film called Udta Punjab? In that, they compare Mexico to Punjab. Guess the director must have got the idea after reading Rajan’s book.

Anyway. I am meandering and meandering. Let me get to the point. In this Saving Capitalism from the Capitalists book Rajan writes: “Throughout its history, the free market system has been held back, not so much by its own economic deficiencies as Marxists would have it, but because of its reliance on political goodwill for its infrastructure. The threat primarily comes from…incumbents, those who already have an established position in the marketplace…The identity of the most dangerous incumbents depends on the country and the time period, but the part has been played at various times by the landed aristocracy, the owners and managers of large corporations, their financiers, and organised labour.”

First time I read this, I didn’t understand only what Rajan was saying. I read this paragraph over and over again and got worried. Then my son-in-law told me, Rajan is only economist. Economists talk only theory. They don’t do it in practical.

But I had this feeling that this guy meant business. He will practice his theory and try and clean up India’s banking system, I had a feeling. Why? I don’t know. I think Kejriwal came in my dream and told me this. And I was right about it.

You see, I had taken this huge loan from a public sector bank in 2008. Those were good days. Everything was looking good.

Indian economy was growing at a fast pace. And like any good capitalist I assumed that the economy will continue to do well and interest rates will continue to remain low.

But all that changed. Over the last four years I have been having difficulty in repaying the loan. No money only.

You see my problem. I have so much loan to repay. Rs 50,000 crore. On that I am paying interest of 12% i.e. Rs 6,000 crore a year. I am having difficulty in repaying interest. How will I ever repay the principal?

And interest is so high. If it was 8%, I would be paying only Rs 4,000 crore a year. Now I am paying Rs 6,000 crore. Rs 2,000 crore more. “Profit main ghato ho gayo!”

Shouldn’t the government help me also? Shouldn’t the interest rates come down? But this Rajan guy did not want to help me only. Kept interest rates high. On top of that he encouraged banks to come after our assets. And that too public sector banks? Imagine!

You know, this is not the first time I have over-borrowed. I did that in the late 1990s also. But somehow I managed to come out unscathed…he he…The taxpayers had to pick up the tab.

And that is only fair no. There are so many taxpayers and so few capitalists who have over-borrowed. No individual taxpayer will feel the pain of having bailed out the capitalists.

But this Rajan guy said no. He insisted on capitalists like me repaying. Selling our assets and repaying.

Imagine? In India? What is the world coming to?

So good only he is not taking a second-term. Going back to the United States.

And it’s time to celebrate. “Kuch murga shurga khaate hain. Peg-sheg lagate hain!”

Oh and you Dear Citizen. Thank you in advance. If you do pick the tab. Ghabrao nahi, there will be no pain. It will be like a painless injection on your bum.

And imagine I have borrowed Rs 50,000 crore. If you don’t rescue me, the bank I have borrowed from will go bust. And you will lose your money!

Remember what did that John Maynard Keynes say? “If you owe your bank a hundred pounds, you have a problem. But if you owe your bank a million pounds, it has.”

Do you know the modern version of that? As The Economist magazine put it: “If you owe your bank a billion pounds everybody has a problem.”

Dear Citizen, I am your problem!

Yours truly,
An Indian Crony Capitalist

Postscript: Rajan has written Saving Capitalism from the Capitalists with Luigi Zingales. His other book is Fault Lines.

The column originally appeared in Vivek Kaul’s Diary on June 22, 2016

22 June, 2016

Of Bhakts, Udta Punjab and Raghuram Rajan

The two news grabbing events last week were the release of the dark drugs drama Udta Punjab and the exit of Reserve Bank of India(RBI) governor Raghuram Rajan.

Udta Punjab finally made it to the theatres thanks to the Bombay High Court. And Rajan decided to go back to academics in the United States, perhaps because he wasn’t offered a second term by the Narendra Modi government.

It was interesting to see how the Bhakts (for the lack of a better term) reacted to both these issues. In case of Udta Punjab they were convinced that the movie was funded by the Aam Aadmi Party(AAP) and hence, showed Punjab in a bad light. And given that, the cuts that the censor board wanted the producers of the movie to carry out, were justified. Of course, none of the Bhakts had seen the movie.

Even some basic reasoning can tell us how stupid this sounds. The script for the movie would have been written in late 2013, early 2014. So, the Bhakts want us to believe that two writers of the movie, wrote the movie back then, planning three to four years ahead, to show Punjab in bad light, before the elections. In late 2013, and early 2014, nobody knew that AAP would be a force to reckon with in Punjab.

In case of Rajan, the Bhakts have been convinced that the man did not deserve a second term, because he was not mentally Indian and had a green card. Some Bhakts even thought he is not an Indian citizen, which is basically rubbish because you cannot be an RBI governor without being an Indian citizen. Still others totally believed in the accusations that maverick BJP leader Subramanian Swamy had labelled at Rajan.

The point being that the Bhakts were totally sure in both the cases and defended their positions vehemently. As Duncan J. Watts writes in Everything is Obvious—Once You Know the Answer: “Common sense is extremely good at making all sorts of potential causes seem plausible. The result is that we are tempted to infer a cause and effect relationship when all we have witnessed is a sequence of events. This is post-hoc fallacy.”

The point is that human beings like explanations and if none exist, they are likely to create them. Then there is also the issue of confirmation bias, which basically means that our initial position on any issue, decides what we think about it or other related issues. As Gary Belsky and Thomas Gilovich define confirmation bias in Why Smart People Make Big Money Mistakes as a “tendency to search for, treat kindly, and be over impressed by information that confirms your initial impressions or preferences.”

This bias plays out in many walks of life. As Leonard Mlodinow writes in The Drunkard’s Life: “When a teacher initially believes that one student is smarter than another, he selectively focusses on evidence that tends to confirm the hypothesis. When an employer interviews a prospective candidate, the employer typically forms a quick first impression and spends the rest of the interview seeking information that supports it.”

How does confirmation bias fit into the case of Udta Punjab and Raghuram Rajan? In case of Udta Punjab, sometime before the film’s release AAP started running an anti-drugs campaign in Punjab. Needless to say, it latched on to the movie. And AAP of course is against the Bhartiya Janata Party, the home ground of Bhakts. Hence, Udta Punjab was bad, and reasons to opposite it had to be found and were found.

As far as Rajan goes he is a man of ideas and an intellectual who is not afraid of speaking out his mind against whatever the government’s stated position on an issue is. This, of course, doesn’t go down well with Bhakts. In Bhakt land, you cannot question the Narendra Modi government. And hence, reasons justifying Rajan’s exit have quickly been found.

The most stupid reason being that India has enough good economists to replace Rajan. Yes, it surely does. But why fix what is already working?

The column originally appeared in the Bangalore Mirror on June 22, 2016