New Delhi: The all-important question that follows from the replacement of the redoubtable Raghuram Rajan with a minnow called Urjit Patel is this: Did Rajan refuse an extension of his term because he disagreed with the note ban policy of Narendra Modi whose early preparations had already commenced in the Reserve Bank despite his objections? A clear answer is not presently available chiefly because Rajan has maintained a stoic silence on the subject. His former boss, the ex-Finance Minister, P. Chidambaram, however, claims that Rajan as Reserve Bank Governor communicated his opposition to the impending demonetization in a five-page note to the Prime Minister’s Office. On record nearly three years prior in the course of a public lecture, Rajan had questioned the efficacy of demonetization to unearth black money by saying that the clever had devices to beat the system. Did his note to the PMO if it exists reiterate his apprehensions and add other cogent economic reasons disfavouring demonetization? Unless Raghuram Rajan breaks his silence, the country will never know. For its part, the Narendra Modi government will not clear the mystery. Indeed, it is in its political interest to fudge the issue. Off and on, voices in government have been making the claim that Raghuram Rajan was “on board” in regard to the note ban.

Whatever the truth, this writer has an uncanny notion that the demonetization controversy will only snowball in the coming months. The more the government tries to cover up and claim success, the more it will be exposed. Ups and downs of governments are quite normal in a democracy. The problem here is qualitatively different. Demonetization comes under the rubric of monetary policy, which is the sole charge of the Reserve Bank. The Reserve Bank as an institution ought to have had a veto on demonetization. Narendra Modi had no business turning it into a political policy measure. Once it became political in the narrowest sense, demonetization lost its monetary rationale. When it was first stated in political quarters that demonetization had an underhand objective to stall the opposition in the Uttar Pradesh election to the advantage of the Bharatiya Janata Party, this writer did not readily believe the insinuation. Now, he can no longer be sure. Even if it is true, you can scarcely be sympathetic to the anti-BJP opposition for its crookedness. But this in turn raises other questions. There were allegations that the BJP in Uttar Pradesh was fully geared for demonetization. Does it mean it was not a level playing field? Suspicions will arise when you employ drastic and disruptive monetary measures to meet partisan political ends. A policy that lay entirely within the domain of the Reserve Bank was seized and executed by the Centre. The frightful consequences of it have come sooner than later.

Democratic institutions face greater erosion of power today than at any time before or since the Emergency. M. Venkaiah Naidu says Modi is not authoritarian but assertive. In the case of Modi, this is a semantic difference; but nothing good has emerged from assertiveness as well. Relations with China and Pakistan have taken a severe downturn. Partly, Modi’s aggressive volubility is to blame. At the same time, rather upsettingly, the Donald Trump administration has turned its guns on India on issues like the guest workers’ visa, the Paris climate accord, and so forth. Meanwhile, Kashmir is getting out of hand with no political solution in sight. With multiple tax slabs, GST seems less and less an instrument of change and business easement, and its highest tax rate of 28 per cent only proves that the Congress opposition was correct to demand a constitutional cap of 18 per cent.

In any case, there is little noticeable change on the ground from already increased revenue collections. Despite the bombast and high advertising spend on the Swachh Bharat campaign, the mounds of garbage in cities and towns keep getting bigger. Like his predecessors, Modi is also abusing power by pressuring public sector units to foot the bill of his wall-to-wall third anniversary publicity. And no one has raised the alarm so far that the mounting military and security expenditures in Jammu and Kashmir on account of the mismanaged border and internal situations are blowing an almighty hole in Central finances. At this rate, Prime Minister Narendra Modi will leave the country politically, economically and militarily infirm when he is ready for re-election in 2019. His overall rating as Prime Minister is two out of ten.


Read “Rating the PM - 1,” “2,” “3,” “4,” “5,” “6,” “7,” “8,” “9,” and “10” here , here, here, here, here, here, here, here, here and here.