Tuesday, October 4th, 2016

Is Raghuram Rajan going to be the next finance minister?

Narada Desk | October 4, 2016 7:30 pm Print
Finance minister Arun Jaitley seems to have fallen out of favor as the Indian Prime Minister Narendra Modi's first two years in office haven't witnessed the overhauling of economic situation as promised during his pre-poll rallies riding which he came to power.
Arun Jaitley and Raghuram Rajan

With PM Narendra Modi over two years into his term as the prime minister of India, stalled economic reforms which were supposed to revitalize the economy have begun to transform into his Achilles Heel. Modi had swept into power in 2014 riding on a wave of public support which was garnered promising jobs and tall claims of his development agenda being the magical remedy to turn around the state of the economy. Much of what resulted in the so-called “Modi wave” was the growing disaffection with the previous UPA government marred by scams and rising inflation.

After coming to power, with the help of the RSS, Modi appointed his well-wisher, Arun Jaitley, as the Finance minister. Arun Jaitley, a close confidante of the prime minister, has been one of his prominent supporter since the very beginning, who backed his name as the prime minister candidate over other nominees and gave legal advise to Modi during his run-in with law during his days in Gujarat. He is Modi’s chief troubleshooter.

The union finance minister was also known as the one who Modi could trust in his cabinet. Dilliwallah Arun Jaitley came in handy for Modi who was considered an outsider by his compatriots in the government and Jaitley’s media connections proved to be useful in testing times. He is largely considered to be the most influential minister in the Modi cabinet, who speaks well and is intellectually in a league of his own when we look at the NDA cabinet, by and large.

But lately, it seems, all is not well between Modi and Jaitley. The first hint of this came in the form of Modi doing a Manmohan by maintaining a deathly silence when Rajya Sabha MP Subramanian Swamy attacked one of his closest. Swamy’s Twitter tirade against Jaitley included taking pot shots at his wardrobe, threatening a blood-bath for giving unsolicited advice, and claiming that he would have made a better Finance minister than Arun Jaitley. Swamy’s longing to become part of the ministry is an open truth and the statement further underscores it.

While some BJP leaders were taken aback by this sort of behavior being allowed, others were quietly relishing the onslaught on the incumbent Finance minister. But what is more shocking is apart from his cabinet colleagues who have shown a lack of support for Jaitley contrary to their vociferous support for Sushma Swaraj and Vasundhara Raje in the Lalit Modi controversy, even BJP President Amit Shah did not utter a word in his favor even though Jaitley was the first person Shah would run to when he faced legal issues vis a vis Gujarat.

It is still to be ascertained whether Swamy is just a loose cannon or acting on the directions of a RSS heavyweight. There have been reports in the past suggesting a difference of opinion between Modi and the RSS on certain issues and it was evident at certain instances like when he made a statement against those using “holy” cow to further the agenda of divisive politics.

Swamy had in the past used Twitter to criticize Raghuram Rajan and Arvind Subramanian also. It is said that RSS bigwigs Mohan Bhagwat, S Gurumurthy and Dattatreya Hosabale decided that Rajan had to exit as the RBI governor. Modi, it seemed, reluctantly let him leave after Rajan refused to stay for another term. He praised Rajan on national television in an interview to a news channel and wished him luck for his future endeavors. The fissures within the BJP-RSS combine are becoming evident and there have been reports of a full scale internal war going on in the BJP.

However, Prime Minister Modi has been caught in a Catch 22 situation where he is in two minds whether to hold his own against RSS propaganda or to come good on his poll promise of reviving the economy. On one hand, the RSS expects him to tow the line by having those close to the organization in the government to further their agenda, while on the other Modi needs to fulfill his poll promises by hiring the right people for the job, lest his image being dented.

Arun Jaitley clearly has not been able to deliver as the finance minister as his core competencies lie elsewhere. Sources in the BJP inform Narada News that it seems that the prime minister is looking to take some hard decisions if his cabinet meetings are anything to go by, especially the one late in the month of August.

The source stated that Modi was highly critical of Jaitley’s work as finance minister and could be looking to replace him, with what speculation says could possibly be either Raghuram Rajan or Arvind Subramanian. The delay in getting the GST bill passed was the last nail in the coffin. The source said that PM wanted Raghuram Rajan to continue as he believed Rajan had the solution to India’s economic woes but succumbing to pressure from the RSS and Jaitley’s deteriorating equation with Rajan resulted in his exit. The return of Raghuram Rajan as the new finance minister in the Modi government would help the PM in his longer scheme of things and rumor mills have it that Rajan could be Modi’s next finance minister.

This would help him kill two birds with one stone. He will be able to install a more-suited candidate as the new Finance minister, salvaging the situation, while sending the message to RSS that he is in-charge. The performance of Modi government is being assessed largely by media and critics on the basis of the state of the economy. The fact that Modi’s most important minister is also the one entrusted with this job shows he placed a lot of faith in Jaitley’s abilities as an economist, however, Jaitley has failed him miserably in the task. That Jaitley has no political base of his own makes matter worse for him as BJP had to ask Navjot Singh Sidhu, who had a proven record, to step out of the fray during Lok Sabha elections to accommodate Jaitley to contest a “safe” seat, from where he lost by a huge margin in 2014. Modi has a lot at stake here.

The source says adds Jaitley is disliked by most within the BJP and alleges that he manages media to work in his favor and plants articles against other BJP leaders, much to their chagrin. A fall in oil and gold imports in the recent past lowered India’s trade deficit to its lowest level in more than five years. Global crude prices have resulted in the oil import bill reducing by 24 percent from a year earlier. This gave a boost to outlook for balance of payments which should have allowed the incumbent government to announce some welfare policies. However, neither did fuel prices fall, nor did this government succeed in controlling rising commodity prices.

In June earlier this year, finance minister Arun Jaitley held a high level meeting on rising prices of food, which have driven up wholesale inflation to its highest in 19 months. Prime Minister Narendra Modi was also present at the meeting. People in the know of proceedings stated that the differences between the prime minister and the finance minister were evident as Modi expressed his displeasure with the handling of things.

Modi objected to the policies being adopted by those concerned as it was not showing any results. He was vocal about the growing disenchantment among the masses as a result of rising prices, unemployment rate, failure to control inflation and lack of tax reforms. The corporates had earlier raised their concerns with the prime minister, complaining about Jaitley’s shortcomings as finance minister, revealed sources. Modi could not possibly ignore the grievances of the corporates as he depends heavily on them to put his plans in place.

PM’s pet project Make in India could not help boost exports, which suffered its 17th straight fall. Although some reports stated that India’s global competitiveness increased under Narendra Modi government, overall, the finance minister was unable to capitalize on the positive environment and the growth rate remained slow.

Narada News learns that the reason why Modi is looking to bring Raghuram Rajan is because he, as the RBI governor, managed to arrest inflation and mobilize funds during difficult times when oil pool deficit was high. He also has a good understanding of the US economy. More importantly, the BJP faces a major talent deficit and Modi can’t find a better person to replace Jaitley from within the party.

The Uttar Pradesh elections are very crucial for the BJP. The party does not have a poll plank for Uttar Pradesh elections next year. Conspiracy theorists imply, the so-called surgical strikes were a figment of BJP’s imagination and an attempt to appeal to the people of Uttar Pradesh and Punjab to vote for a “strong government”. The column published on Wire.in by Siddharth Varadarajan is an interesting read.

If reports of Rajnath Singh being the face of BJP in UP are true then the home ministry might go to Jaitley unless Kiren Rijiju is promoted. There have been reports earlier that Modi and Rajnath don’t see eye to eye. Singh’s ambitions are well known and Modi will look to cut him to size to set an example for others. Rajnath, coming from the OBC community, would be the best bet for BJP in the upcoming UP elections as opposed to a higher caste candidate as it does not have a prominent face to project.

It remains to be seen how Modi will accommodate Arun Jaitley if in fact he has plans to redesignate him and bring in a new finance minister as Jaitley is one of the few people the PM trusts apart from his aide BJP president Amit Shah. Also, Modi needs Jaitley’s connections, especially in media, and PR skills to remain a step ahead of the game.

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