The governor of the Reserve Bank of India has been given a public notice of dismissal. While India is not the model of global best practice, it has followed the model of central bank independence for some decades. So there has been an implicit understanding that the governor acts in what he considers to be in the best interests of the economy, though his opinion may not be shared by the finance minister. P. Chidambaram made no secret of his dissatisfaction with Raghuram Rajanís conservative policies, but he would not have thought of overriding him. Subramanian Swamy has not only thought so, but has promised to get rid of Mr Rajan for the odd reason that he taught in Chicago and belongs to the Chicago school of economics. And in the process, he has let out that he expects to be the economic supremo if the National Democratic Alliance comes to power.
Men will come and go, and with them their foibles. Mr Swamy has announced that savers will get 12 per cent on deposits of 3 years, up from some 9-10 per cent just now. Whether he meant it or not, that means the lending rates will go up by a couple of per cent. That would not be popular with the well-heeled supporters of the Bharatiya Janata Party. But perhaps Mr Swamy has it in mind that inflation, which came down to unprecedented levels in the dying days of the UPA government, should be jacked up. That would have been no problem in those days; all that the government would have done was to buy up millions of tons of foodgrains. Such are the follies that governments can indulge in at the expense of the people. But then, Mr Swamy said something interesting: that agriculture would be turned into an export industry. It is a good idea to introduce Arabs to mishti doi, known on the west coast as shrikhand; but it is doubtful that the government can find markets abroad for its foodgrain mountains if it continues to buy up foodgrains at absurd prices.
Giving up price support is an excellent idea. But then, the BJP has allies in Punjab, whose farmers benefit from the price support; it is to be wondered how Mr Swamy will persuade those muscular allies. More rational solutions are possible. It would be best to free up agricultural markets, and to compensate governments upset thereby from the money saved. But the finance-minister-in-waiting needs to give some thought to this, and even more, to carry the allies with him.The thoughts he has had can also be troublesome. If, for instance, the government auctions coal deposits, the current model of Coal Indiaís monopoly would have to go. With it will go cheap coal to state electricity boards for power production, and a massive increase in electricity rates. It is not necessarily a bad idea, but a bit audacious.