Why Raghuram Rajan's message is important, but could rebound on RBI

In the current public discourse on religious tolerance, Reserve Bank of India Governor Raghuram Rajan's convocation address to the students of the Indian Institute of Technology (IIT) Delhi on Saturday, delivered an unmistakable if nuanced critique of the ideological underpinnings of this government and their outward manifestation. Drawing on the work of Nobel Laureates Robert Solow and Richard Feynman and using the example of India's global IT achievements to make his point, Dr Rajan linked the importance of ideas to a nation's progress and highlighted the need to "foster competition in the marketplace for ideas" as a prerequisite for delivering economic growth. Achieving this, he argued, required "the right to question and challenge, the right to behave differently so long as it does not hurt others seriously". When someone of Dr Rajan's stature and authority adds his voice to the growing avalanche of criticism from a broad range of civil society, the importance of the message cannot be underestimated. It is especially impactful because he addressed precisely the age cohort that the current regime targets with its message of religious nationalism with all its deceptive certainties.

In leveraging the functional independence of his job as central bank governor to comment on issues that are, strictly, outside his official remit, Dr Rajan has displayed candour and courage rare in India's public servants. However, there may be unintended repercussions to the institution he heads. To be sure, this is not the first time he has publicly expressed dissatisfaction with the government's non-monetary policy actions and it is unlikely to be the last. In this, he is perhaps following the precedents set by central bankers like Ben Bernanke and Janet Yellen of the US Federal Reserve and Mark Carney of the Bank of England. But they work within developed democracies where standards of debate are reasonably mature. Dr Rajan raised this point in his speech. "Tolerance means not being so insecure about one's ideas that one cannot subject them to challenge - it implies a degree of detachment that is absolutely necessary for mature debate." Unfortunately, this is manifestly not the case in India, so it is unlikely that his remarks will be received in the spirit in which they were made.

Indeed, the manner in which senior ruling party functionaries are fiercely dismissing all criticism as politically motivated is a case in point - though President Pranab Mukherjee's repeated reference to intolerance in quick succession admittedly makes that point hard to refute. Dr Rajan's criticism should also be set against the growing pressure - as much by the last regime as this one - to curtail the RBI governor's room for independent action and the proclivity to establish unequivocal control over institutions. It could encourage the government to take that short step towards appointing governors who may lack the expertise and understanding that consistently marked past appointees - and who is thus amenable to doing the government's bidding. It is a dangerous prospect.