All of a sudden, government servants in charge of managing the economy are under attack. Following the resignation of the RBI governor, BJP Rajya Sabha MP Subramanian Swamy has gone on the offensive against the chief economic advisor and the economic affairs secretary. It is high time ground rules are laid out and observed, on the relationship between legislators (including ministers) and government servants.
The relationship depends considerably on the nature of the government servants concerned. They could be independent, obsequious, collusive, matter-of-fact or combative. Many government servants are independent but not lacking in finesse, yet they are subjected to harsh treatment (poor confidential reports, frequent transfers, harsh language). The obsequious ones are those who get coveted assignments. All political parties when in power identify them quickly and use them.
The ones that collude are soon identified as favouring one party. Unless they have made enough money and moved to secure assignments (constitutional or statutory regulators for example), they suffer when their preferred party loses office. The matter-of-fact ones do what they are told but ensure that there is enough on paper to protect them when investigations take place. Many of them reach high office. The combative ones are those with the courage to stand up to unreasonable demands. They are prepared for harsh consequences. Many stagnate in uninteresting assignments.
Swami has picked three people to attack, two being successful academics who are NRIs on contract assignments. The third is an IAS officer. Government servants are not expected to respond in public to harsh comments about them. The RBI governor has, in a way, responded by stepping down.
Government servants are soft targets for public attacks. The governor of a central bank, responsible for monetary and financial stability, is more so. Such attacks could undermine credibility and authority. The fact that Raghuram Rajan is to be in office till September 4 will diminish the public acceptance of his observations on the economy. This is not a time for uncertainty over the leadership of the RBI.
Global foreign exchange values reacted sharply and negatively to the British decision to exit the European Union. Other consequences of international trade, money markets and money flows will follow. Doubts over whether the Prime Minister and finance minister, representing the Government, and the RBI governor are on the same page, can be damaging at this stage. Swamy was a noted economist, with recognised expertise on the Chinese economy. He might well have been a candidate (till he turned 75) to be finance minister of India. Today, he has no position except that the media gives ample room to his statements. His political career has been chequered. He has the reputation of thoroughness in investigating the politicians he has charged, most times successfully. This is perhaps the first time he has gone after government servants. If he persists with this at this time of global uncertainty and crisis, he could severely damage the Indian economy.
The economic advisor and the secretary, economic affairs, are not reported to have made statements outside their tasks. However, Rajan has been a public intellectual with a sense of humour. He has, on more than one occasion, been reported to have reacted almost facetiously to remarks on the economy by the Prime Minister and on the burning political issue of intolerance. His ability is unquestioned and his actions (with the help of collapsing oil prices) have helped bring down inflation, and improved our foreign exchange situation.
Similarly, he has pushed for the need to improve bank balance sheets and non-performing loans. His refusal to bring down interest rates sharply and quickly did not go down well with industry associations and the finance minister. It can, however, be argued that lower interest rates would not have stimulated growth. Investment may respond more to reform measures such as opening up sectors to 100 per cent FDI. Sadly Swami does not talk economics, only personalities.
A firm sense of resolve is desirable in an RBI governor. This might be undermined by his lame duck status and attacks on him.
It’s offensiveWe must have the equivalent of a Public Service Commission, with penal powers, that can act against individuals who make public allegations against government servants, including the RBI governor. Even if the allegations are proved true, making them in public against key economic authorities must be treated as an offence for their effect on the economy.
Such a commission should consider charges in camera. Public allegations against government servants must be strongly discouraged because they are in no position to retaliate.
The writer was director-general of NCAER