Raguram Rajan Bloomberg/Getty Images

India’s Economy after Rajan

Raghuram Rajan’s decision not to seek a second term as Governor of India’s central bank was met with shock from many observers. While Prime Minister Narendra Modi’s government certainly had its problems with Rajan, few believed that the government would take a step that so clearly undermines India’s interests.

NEW DELHI – Raghuram Rajan’s decision not to seek a second term as Governor of the Reserve Bank of India (RBI, India’s central bank) was met with shock from those of us who have been cheering on the Indian economy. While it is no secret that Prime Minister Narendra Modi’s government had its problems with Rajan, few believed that the government would take a step that so clearly undermines India’s interests.

The government never liked Rajan’s insistence on pursuing interest-rate cuts gradually in order to promote price stability; instead, it wanted to see them slashed aggressively, in order to spur growth. Nor was the government particularly enthusiastic about Rajan’s role as a public intellectual. And then, in the past few weeks, a toxic and ludicrous outburst of criticism from those close to the government erupted, focusing on Rajan’s performance and his supposed lack of “Indian-ness.”

Despite all of this, there were compelling reasons to believe that Modi’s government would keep Rajan on board.

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