Just a couple of days ahead of August 15, stray paragraphs of a speech started showing up repeatedly as wire stories and newspaper articles across the Indian media. The title of the speech, 'Finance and opportunity in India', could not have been more unpromising. The occasion was a memorial lecture to honour a respected civil servant who died 20 years ago.
The address tackled a question we have all debated with more fire than light: Why voters in India repeatedly elect corrupt politicians. This may be a tired subject but Reserve Bank of India Governor Raghuram Rajan's speech brimmed with lucid insights into the dystopian dynamics of a public benefits system that benefits middlemen rather than the poor. "The conceit that high morals lie only with the upper middle class," Dr Rajan argued empathetically, overlooks that "the tolerance for the venal politician is because he is the crutch that helps the poor and underprivileged navigate a system that gives them so little access."
The speech examines why voters rely on corrupt politicians for jobs and public services and how this "cycle of dependence" extends to the corrupt businessman "who needs the crooked politician to get public resources and contracts cheaply" and then logically and lyrically progresses to why we need cash transfers (and financial inclusion) to deliver benefits effectively and unwind this vicious circular game. In Katherine Boo's beautifully written book on the Mumbai slum Annawadi, she put the problem similarly and it applies to how all of us relatively well-off Indians approach everything from college admissions to trying to join the Willingdon Club. "Among powerful Indians," Ms Boo observed, "the distribution of opportunity was typically an insider trade."
More expert minds than mine can assess whether Dr Rajan will succeed in pushing through the recommendations of the P J Nayak report to give public sector banks greater autonomy - but, as a communicator, there is no one quite like him in Indian public life today. He answers questions directly, which is almost a forgotten art among our verbose and evasive politicians. He explains complex issues elegantly. Asked about "purging" the public sector banks of corruption by Mint, he highlighted the absurdity of the way they are managed: "You are demanding a huge amount of honesty in the system when you put people in charge of Rs 5 to Rs 10 trillion of assets, give them absolute command, and tell them they are here for one or two years... you are creating a perverse incentive."
Santosh Desai, CEO of branding consultancy FutureBrands, argues that while there was a "presumptive fascination" with Dr Rajan when he assumed the job a year ago, he has more than lived up to the image that preceded his taking up the job, as a well-known international economist who had pretty much predicted the 2008 financial crisis. "He is a remarkable communicator. There is a lack of bureaucratic obfuscation that we associate with public figures," says Mr Desai. I turned next to Shobhaa De, whose emblematic column on Dr Rajan in The Economic Times made it permissible to discuss whether a central banker could be, erm, uh… sexy. "He is very clear about what he wants to convey. He is very 'American' that way," said Ms De, who confesses to having "never met" the man (Dr Rajan is an Indian citizen who worked for several years in the US). "He has his priorities in place. He doesn't beat around the bush even if it is conveying a message to the government of the day." The Reserve Bank's medium-term inflation target of six per cent has been heard loud and clear - and repeatedly.
This ability to set an agenda was on display in Dr Rajan's first month on the job last September when he single-handedly calmed the nerves of overseas investors, after the rupee had fallen sharply in a couple of months over the torrid summer of 2013. The economic fundamentals didn't change over that first month in the job - but Dr Rajan changed the terms of the debate, so we didn't seem like Thailand in 1997. That the rupee had become a currency celebre of the worst kind was driven home to me last summer when a Chinese tailor in Hong Kong asked me why it was ailing.
It helps that - like Warren Buffett, whose annual letter to shareholders is a joy to read - Dr Rajan writes well enough for journalists to envy him. In a speech last year, he likened the "manic depressive" responses by fans of the Indian cricket team to similarly "bipolar behavior" in assessing India's economy. The analogy is effective because it is so apt.
More than a hundred years ago, a rupee crisis unsettled P G Wodehouse's household because for some bizarre reason his father's pension after retiring as a magistrate in Hong Kong was denominated in rupees. "The rupee was always jumping up and down and throwing fits," recalled Wodehouse years later. The crisis meant that Wodehouse's father could not afford the fees to send him to Oxford. Wodehouse Sr used his connections to get his son a job at Hong Kong and Shanghai Bank instead.
Currency crises come and go - Korea weathered one in 1997 and emerged stronger for it - but changing the political economy of a country is a longer game. Dr Rajan is likely to trip at the hurdle of changing the incentives of our PSU banks and prising their control away from the government. In a rare use of jargon, he has called for "strategic incrementalism," as a way to try privatising a small PSU bank first. It's a great idea - but it read like science fiction to me. From our industrial oligopolies to our bloated public sector banks, the prevailing ethos in India is survival of the fattest. That is how our politicians, BJP and Congress alike, prefer to "distribute opportunity."