MUMBAI: Former Reserve Bank of India governor Raghuram Rajan has attacked the Narendra Modi government, saying its majoritarianism and authoritarianism were taking the country down a “dark and uncertain path”. He also accused it of weakening institutions.

The former RBI head also made a dark prognosis for the economy, stating in a recent lecture that the government’s economic performance is not sustainable and that there is a risk of the country going the Latin America way in terms of populist policies.

According to Rajan, “factors such as ill-conceived demonetisation and poorly executed GST” were the tipping point for the current slowdown. “Even while growth is slowing, the government is pushing its welfare programme, which gives it a lot of political capital among people. There is tremendous pressure on the government for a stimulus. But you cannot keep spending, something has got to give,” Rajan said in his OP Jindal Lecture at Brown University in the US on October 9.

Rajan, who as IMF chief economist forecast the sub-prime crisis in 2005, said the stress in sectors such as finance and real estate was a symptom, and not the cause, of the slowdown. “The reason it is in stress is that we have not generated sufficient growth more broadly,” said Rajan.

He blamed centralisation for the Modi government’s inability to progress on the economic front. “Modi did not do better in the economy during the first term because the government is extremely centralised which puts a lot of pressure on the leadership, which does not have a consistent, articulated vision on how to achieve growth,” said Rajan.

“Ministers are disempowered. The bureaucrats are unwilling to take decisions on their own and do not have a strong idea of serious reform,” said Rajan. “The bureaucracy’s effectiveness has been diminished because in parallel India is running a campaign against corruption in the past. For a bureaucrat there is no significant upside to taking action if he can be subject to vigilant (sic) inquiry by the next administration,” he added.

“Even senior officials have been held in custody without upfront evidence. I do worry that the former finance minister has been held in jail without trial for over a month,” said Rajan.

“Because of the weakness of institutions every government runs the risk of turning authoritarian. This was true about Indira Gandhi after 1971 as it is true of the Modi government in 2019,” said Rajan. He said the key test of authoritarianism was whether institutions are being weakened or strengthened and the experience in India was not encouraging. “Even the high judiciary, which was so active in the past, has been strangely silent on the constitutional issue whether changes in Kashmir are warranted and whether the continuing restrictions on a sizable number of citizens there is okay constitutionally,” the ex-RBI governor said.

Raising the example of tax department raids on opposition leaders, Rajan said, “Why evaders are problematic only in opposition and not in members of the opposition who pledge allegiance to the ruling parties is unclear. It certainly seems it is not unconnected to political affiliations,” he said. While central bankers have are usually reticent in matters outside the economy, Rajan has a reputation as a free thinker speaking out openly on issues such as tolerance.

Highlighting that the ruling party identified majoritarian issues like triple talaq and Kashmir, Rajan said: “I don’t believe that the majoritarians improve national security. They weaken it, they want national integration on their terms. Majoritarian nationalism is intrinsically divisive because it labels a bunch of citizens the ‘others’ and sets impossible terms for these minorities to be considered true citizens. It ends up alienating them and, as Lincoln said, a house divided by itself cannot stand.”

Rajan warned that while majoritarinsim may win elections, it is taking India down a “dark and uncertain path”. “India is better off strengthening its democracy and decentralising,” he said.

According to Rajan, Modi was elected to power a second time because allegations on the Rafael deal and closeness to business houses did not stick and also because, at the time of the election, the dialogue was changed from performance to national security. He said the government had “superb command over social media” which helped sell the government’s performance widely. “Even today you see WhatsApp messages saying that 5% growth is wonderful without recognising that its come down,” said Rajan.

Commenting on the perception that Modi is respected globally, Rajan said, “People respect Indian leaders not because of the force of their personality but because they represent a 1.3-billion-strong market democracy growing fast.”

