CPI(M) General Secretary Sitaram Yechury wrote a letter to Prime Minister Narendra Modi on Thursday urging him to take immediate action on recovering loans from the top 100 borrowers in the country. Needless to say, most of these loans have been given by the public sector banks, which are reeling under the stress of bad loans or ‘non-performing assets’.
Yechury alleged that the government was not serious about recovering bad loans despite the NPAs going up by 80 per cent in the last one year. He quoted a Credit Suisse report to say that the top 10 corporates owe ₹7 lakh crore to the public sector banks and these include the Reliance Group, Adani Group, Essar and Vedanta.
But the interesting aspect of Yechury’s letter to the Prime Minister was his defence of RBI Governor Raghuram Rajan. Yechury was extremely critical of the government’s handling of the issue, saying: “Your silence, while an important Constitutional functionary was being viciously attacked, has led many to believe that you are not interested in completing the bad loan clean-up exercise. This leaves no other explanation that your government actively patronises and promotes crony capitalism”. Strong words, indeed, though not surprising as they come from an Opposition leader.
Capitalist excesses
But what brought a wry smile to one’s face was Yechury’s spirited defence of Rajan, coming as it did from the leader of the country’s largest communist party. After all, the RBI Governor, who was earlier Chief Economic Advisor to the Finance Ministry, is an ardent proponent of the neo-liberal economic ideology against which the CPI(M) never fails to rant.
A few years ago, Rajan had written a book titled Saving Capitalism from the Capitalists along with his University of Chicago colleague Luigi Zingales. Instead of singing a dirge for the capitalist ideology, the book talks about rescuing it from the excesses of capitalists — not something that would warm the cockles of the socialist heart.
Rajan’s recommendations for reforming the financial sector would also certainly have got the Left’s goat. In 2009 the erstwhile UPA government had tasked Rajan with drawing up a roadmap for financial sector reforms in the country. The report, titled A Hundred Small Steps: Report of the Committee on Financial Sector Reforms , came up with 35 proposals covering the entire expanse of the banking and financial markets, including equities and bonds.
Rajan’s key proposals
Some of the key proposals enunciated in this report, which has become the cornerstone of the current government’s efforts at reforming this sector, include opening up rupee-denominated corporate and government bond markets to foreign investors, selling small under-performing public sector banks to another bank or strategic investor, liberalising takeovers and mergers of banks and allowing foreign banks in this activity, strengthening PSU bank boards and delinking them from additional government oversight including that of the CVC and Parliament.
Almost all these proposals would be anathema to the Left, especially allowing foreign investors in government bond markets, delinking government oversight of PSBs and allowing foreign banks in takeovers/mergers of Indian banks.
Given the deep antipathy the Left has against global finance capital, every one of these proposals would have grated, which is what makes Yechury’s defence of Rajan ironical and interesting.
Fighting crony capitalism
But to Yechury’s defence, despite their ideological differences, one area where Rajan and the Left would have seen eye to eye was cleaning up the bad debt mess in the public sector banks and combating crony capitalism. The country’s top business houses would not have had access to such large sums from public sector banks without political patronage. Also, the corporates had got used to ‘ever-greening’ their loans under corporate debt restructuring, where loans were rolled over by increasing their tenure and tweaking interest rates.
Rajan put an end to all this, besides using some strong words against crony capitalists in India. In a lecture in 2014, he had said, "An important issue in the recent election was whether we had substituted the crony socialism of the past with crony capitalism, where the rich and the influential are alleged to have received land, natural resources and spectrum in return for payoffs to venal politicians. By killing transparency and competition, crony capitalism is harmful to free enterprise, opportunity, and economic growth.”
So, despite their obvious ideological differences and the contradictions involved, the Left did manage to find some common ground with Rajan. Yechury’s spirited defence of the outgoing RBI governor should perhaps be seen in that light.