“Unfair attack” on RBI Governor. Really, Mr Jaitley?

Sunday saw Finance Minister Arun Jaitley trolled on Twitter after he weighed in with this: “An unfair attack by Jairam Ramesh on the RBI Governor. Must politicians attack those who can’t defend themselves in the same tone?”

Mr Jaitley was responding to this article written by Jairam Ramesh for National Herald.

The twitterati pounced on Jaitley and wondered why he had not defended Raghuram Rajan, the previous Reserve Bank of India Governor, when he was being attacked by BJP MP Subramanian Swamy. Some tweets also asked Jaitley why the Law Minister and the Attorney General were attacking the Chief Justice of India this week.

The Finance Minister’s tweet fuelled more speculation about the RBI Governor’s silence during the last three weeks on the cash crunch faced by the economy and people. The impression is increasingly gaining ground that the RBI Governor was served with a fait accompli and was forced to compromise on the RBI’s autonomy. Jaitley’s intervention on Twitter could be aimed at buffeting him from criticism and ensuring that he does not quit at this critical juncture.

Such speculation is supported by the fact that Urjit Patel was a UPA appointee. He was appointed Deputy Governor of RBI in 2013. He was also a close ally of Raghuram Rajan and looked after monetary policy before getting appointed as Dr Rajan’s successor in September this year. The appointment was then seen as the Government’s desire to ensure continuity. He was also described as ‘hawkish’ on interest rates and was said to be against lowering interest rates. However within a month after taking over as RBI Governor, the RBI did lower the bank rates marginally.

The Kenyan-born Patel has an impeccable academic record, having a Ph.D from Yale, an M.Phil from Oxford and a degree from London School of Economics. He has had a distinguished career behind him and observers feel that it is highly unlikely that he would not have made adequate preparations had he known about the Government’s plan to demonetise 86% of the currency in circulation.

The failure of the RBI to keep a steady supply of currency, its failure to ensure that all the ATM machines are functional, its decision to print ₹2,000 currency notes, and so on, put him in the firing line during the past few weeks. A confederation of bank officers and association of bank employees have both called for his resignation and more than one leader has publicly wondered whether he was actually consulted by the Government, which however claims that the proposal came from the RBI and that its Board of Governors had passed a resolution to this effect.

In the article Jairam Ramesh had also pointed out:

*That Urjit Patel was an Independent director and member of the audit board of Gujarat State Petroleum Corporation (GSPC) between 2006-13.

*That during this period loans from banks to GSPC ballooned from ₹270 Crore to ₹14,000 Crore

*That the CAG had been critical of the borrowings

*That Urjit Patel failed to point out the conflict of interest between Gujarat’s petroleum and energy minister Saurabh Patel and a private company Gujarat Natural Resources Limited, in which the minister had invested and with which GSPC tied up.

The RBI Governor’s continued silence is leading to further confusion. And it is still not clear whether the Government is deliberately sidelining him.