The other remarkable fact about this incident is the sympathy this man has evoked in the media. Suppose Deepika Padukone declared tomorrow that she was retreating to Madeira to grow camellias; many might like to join her, but I am not sure there would be such lamentation. Mr. Rajan is going to retreat to the shores of Lake Michigan to grow ideas. It is an enviable life for an economist; no one need feel sorry for him. True, Mr. Rajan looks enviably winsome; I do not think anyone else in the government comes anywhere near him. But that is not the reason behind the outbreak of grief; it is that he is by common consensus the best man for the job, and even people who never gave a thought to the exchange rate think that it is a bad idea that he should have been eased out in such an unceremonious manner.
The conflict between political discretion and economic circumspection sharpened in the last years of Mr. Rajan’s tenure. Politicians in power tend everywhere to be expansionist; they would prefer to spend more and borrow without interest. If they do so without restraint, the country can have inflation which, if not controlled, can turn into hyperinflation. In a world of open economies, excessive spending by governments can also result in payments problems. This is why, in recent decades, better-run countries (Editor's comment - which one?) have freed central banks from finance ministries and given them power to control money supply, influence interest rates and regulate financial markets.
Not surprisingly, no leader of the Bharatiya Janata Party has such rapport with academics and intellectuals. Its leaders believe that knowledge is hidden in ancient Hindu scriptures. More important, they do not believe that knowledge emerges and grows through contention of ideas and testing them against facts. After coming to power, the party’s new appointees have tried to replace the long tradition of contention with a new one of indigenous faith. (Editor's comment - Market Economics is also faith based). Mr. Rajan is a worshipper of a foreign economic faith. He turned the Reserve Bank into a temple of western-style independent monetary policy. Monetary policy must be retrieved from the heretic, and be brought back into the ideological pantheon. Mr. Rajan would not be handled roughly like Kanhaiya Kumar, but sedition will be dealt with without mercy.