NEW DELHI -- Reserve Bank of India Gov. Raghuram Rajan stepped down this month despite an impressive tenure that won him international accolades. His forced departure, bearing the fingerprints of a religious group, does not bode well for the country's standing as the world's so-called largest democracy.
The 53-year-old Rajan left last Tuesday, two days after completing his three-year term as governor of the central bank. The former head of research at the International Monetary Fund had famously predicted the 2008 financial crisis and had been named governor of the year by the Banker, a UK's financial magazine.
Rajan was willing to stay on for another term. But a behind-the-scenes operative outmaneuvered him to engineer his exit.
Not an economist
A nameplate reading "Dr. Subramanian Swamy" adorns a red gate pillar on a property near the India Gate war memorial, a tourist spot.
Swamy belongs to the ruling Bharatiya Janata Party and serves in the upper house. Clippings from local newspapers quoting him sit on his office desk, perhaps suggesting that he is the type sensitive to his public reputation.
Rajan is not an economist, the 76-year-old veteran politician said in an exclusive interview in late August, pointing to the central banker's background in engineering and in management at the Massachusetts Institute of Technology.
Swamy earned his doctorate in economics at Harvard University in the 1960s and taught there before serving as minister of commerce and law in the 1990s. But despite his impressive resume, his logic for ousting Rajan was rather far-fetched. He claimed that Rajan did not understand general equilibrium theory -- a basic economic principle holding that prices are determined by supply and demand in the entire market -- and denounced Rajan's interest rate increases as the cause of suffering for small and midsize businesses.
In May, Swamy criticized Rajan's rate hikes till the beginning of 2014 to the local news media. He wrote to Prime Minister Narendra Modi a few days later, urging him to fire Rajan. He called the central banker "mentally not fully Indian," citing his permanent resident status in the U.S.
Swamy is known for his anti-corruption campaign targeting the Indian National Congress, a major opposition party that was in power before the current government. He pulled down Congress's popularity ,and became one of the key architects behind the 2014 government changeover.
Swamy denies the involvement of the ruling BJP or its Hindu-supremacist backer, the Rashtriya Swayamsevak Sangh organization, in the ouster of Rajan. But few believe that he did so entirely on his own.
Powerful hidden hand
And the RSS did arrange for Swamy to wield influence over the Ministry of Finance, involved in the change of the central bank's leadership. The RSS was ticked off by Rajan's criticism of its Hindu-supremacist campaign. And his bold reform steps to curb inflation and clean up bad debt, among other things, angered vested interests affiliated with the RSS.
The RSS leadership demanded in April that Modi let Swamy advise the Finance Ministry on all matters involving the ministry, a BJP source revealed. Modi refused the initial push from the RSS to remove Arun Jaitley as finance minister but did consent to installing Swamy as "supervisor," according to the source. As of May, Swamy was in a position to "unofficially advise" the ministry.
But Swamy's role did not extend beyond driving Rajan out. Swamy was not privy to the list of candidates to replace Rajan, which went up and down several times between Delhi and RSS headquarters in Nagpur in early July.
The final chapter of Rajan's resignation was also initiated by the RSS. On June 18, the RSS headquarters relayed its disapproval of keeping Rajan to Modi in the morning, and word reached Jaitley soon after. That evening, Rajan released his resignation email sent to RBI staffers.
Multiple sources attested to Modi's desire to keep Rajan as his top central banker. In nearly every country, "shadowy power brokers" lurk behind the throne in politics. But that an organization that is not even a political party meddled in key leadership decisions has grave implications for a country that prides itself on being the world's largest democracy.
YUJI KURONUMA, Nikkei staff writer