Raghuram Rajan’s Chicago University colleague and co-author Luigi Zingales said the RBI governor is being attacked for ‘fighting the inefficiency of the banking system’ and for taking on the crony capitalists in the country.
Amid the debate on whether Rajan will get an extension or not beyond his current term ending in September, Zingales said governorship used to be entrusted to grey bureaucrats that left no impact. Rajan however is the dream of the new India and reached the top of the Indian central bank because of his skill, not because of his political alignment.
Rajan an on-leave professor of finance at the University of Chicago Booth School of Business, has been under attack from the ruling party MP Subramanian Swamy and others, for what they call the RBI governor’s failure to effect interest rate cuts to boost the economy.
While admitting he could be biased as Rajan has long been his colleague and coauthor, Zingales called the charges absurd, as he heaped praise on the RBI governor. Rajan is also accused of being part of a group set up to defend the US’ dominant position in the global economy and to serve the interests of international finance.
He added as governor Rajan has rightly decided to force the banks to cut exposure to their most dubious borrowers, which from an economic point of view is the best time, with the country growing at 8 percent, as these losses can be absorbed by the banking system.