Rahul Gandhi was not shy to flaunt his party’s consulted, the former governor of RBI, Raghuram Rajan on NYAY scheme. Rajan supported the scheme and said that it can change how things are run. “There are ways of structuring the scheme in a way that it creates growth at the grassroots level. It will allow people to make financial decision on their own. The question is how it will roll out. Will it add on to existing schemes or will it revolutionise things? We have a chance to target poverty alleviation effectively. If done effectively it [NYAY scheme] can change how things are run,” said Rajan.
The people from left-wing ecosystem (the economic policies of Rajan certainly does not belong to this block) and Congress fed media were happy to announce that a globally esteemed economist expressed support for their scheme. As Rahul Gandhi has said that Congress consulted Rajan on NYAY, the support for the scheme by him was obvious.
The real question is whether the scheme is viable just because Rajan supports it. He successfully predicted the 2008 financial crisis in 2005 but after that he has made many wrong predictions and absurd arguments. His decision to keep the interest rates high during his tenure at RBI hurt the economic growth of the country. Most of economists and policymakers agree that his stance on monetary policy was very conservative and he overestimated inflationary pressures on economy. He tried to go through Basel III norms to regulate banking in the country and credit dried up due restrictions on lending. The MSMEs were badly hit due PCA norms implemented by Rajan.
Before that he predicted another global financial crisis back in 2014 which obviously did not happen even after 5 years. “We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost,” said Rajan in 2014 in an interview with Central Banking Journal.
Earlier he claimed that the economic condition of Kashmir is very poor and its youth are frustrated. According to him, they follow a very peaceful version of Islam but the poor economic condition is among the reasons behind the alienation of the Kashmiri youth and terrorism in the region. However, the claims of Raghuram Rajan fall flat against hard data. Overall the state of health, education and other socio-economic condition of Jammu & Kashmir is better than many other well-off states of the country. The more important fact is that much of the money for this expenditure is coming from the pocket of the central government. Jammu & Kashmir is one of the most pampered states of the country with 73.6 percent of the state’s total revenue from central government while the state generates only 26 percent of total revenue.
Raghuram Rajan is definitely not an expert on Kashmir, he has not spent a month in the valley. He is not even remotely aware of the conditions of Kashmir and the problems faced by its youth but he did not hold his horses in expressing his opinion about the valley.
The 80:20 gold import scheme initiated during Rajan’s tenure proved disastrous and scrapped down later. According to a CAG report, the government lost around 4500 crore due to 80:20 gold import scheme in which jewelers like Nirav Modi and Mehul Choksi, the main accused in 13000 crore PNB fraud case were prime beneficiaries.
The celebration of Rajan’s support by the left-liberal brigade is misguided. Rajan is an expert on banking not welfare economics. The support of Raghuram Rajan to the NYAY scheme was scripted because the party consulted him before its formulation. Rajan’s views have been wrong on many issues and his policies at RBI proved harmful to the Indian economy and so could NYAY.