[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]here are a lot of media reports that Arvind Subramanian is being considered for the position of the next RBI head, due to the exit of Raghuram Rajan. I support Dr. Subramanian Swamy’s view that both of them are not the right candidates for the position of the RBI governor. I approach this from a risk management perspective and suggest that the Indian government not have NRIs flown in for top positions in the government.
First, it is almost impossible to perform a thorough background check on NRIs living outside India for an extended period of time. While not doubting the patriotism of NRIs to India, the risk of appointing someone with conflict of interest with another nation is very real.
Second, NRIs flown in have less skin in the game than a civil servant who has toiled through the Indian system and served the country. If a civil servant commits an illegal act as the head of a government body and is discovered after his/her term, he/she can be charged for their offences easily when compared to someone who has left the country after his term.
Third, the disconnect between the workings of the Indian government and the NRI can be frustrating for both parties, as evidenced by the debate on interest rates. While the Modi government wanted to create jobs using lower interest rates to fulfil their election promises. Rajan decided to chose an independent path of fighting inflation through higher interest rates and worsened the NPA situation for the PSU banks. This sort of disconnect between the central bank and the government is rarely seen in G20 countries.
Finally, once an appointed NRI finishes his term and goes back to his country of residence, there is a huge potential for leakage of confidential information. This information could be exploited by another country or a large corporation.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]his issue has been dubbed as the “revolving door” problem and it is a great source of concern even for the US government, when it appoints its resident citizens as regulators. An investment bank, for example, may get its senior employee to join a regulatory body like the US Federal Reserve or the SEC. Such an employee may bend the rules in favour of his former employer. Once this employee leaves his regulatory position, he may join another investment bank or a consultancy and start advising companies on how to game the regulatory rules.
While the NRIs bring a global perspective to the critical problems that India faces, they are best suited as consultants to the government with limited access to confidential information. The risks of appointing NRIs such as Arvind Subramanian, as the head of RBI is not justified.
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- Principled opposition to Arvind Subramanian as RBI head - June 23, 2016