HAS GOVERNOR #RAGHURAM #RAJAN USED A MISNOMER ?

LAST FRIDAY, ON SEPTEMBER 18TH 2015, BARELY TEN days after Prime Minister #Narendra Modi hectored the heads of Indian business who were collectively urging like Oliver for more, it was the turn of the Governor of the Reserve Bank of India (RBI), #Raghuram #Rajan to do some plain speaking. His audience consisted of leading bankers and businessmen of the country and he was delivering the #C.K. Prahalad Memorial Lecture.  A précis of his speech would be : “Stop jugaad, don’t pressure for shortcuts: we need the long haul.”

FOR THE PAST FEW MONTHS, THE RBI GOVERNOR   has had to face a deafening demand from business and industry, self-styled economists and miscellaneous commentators, the financial press, and stock market players for a rate cut as if it was the sole panacea for India’s economic woes.  Even the Government (read Finance Ministry) did not hesitate to drop strong and subtle hints that mirrored the aforementioned demand.  On September 29th 2015, we will have the official response from India’s central bank.  In the interim however, the C.K. Prahalad Memorial Lecture was an excellent opportunity for Rajan to speak his mind with refreshing candour and clarity. He expressed his disenchantment with jugaad that must have driven his audience to a long spell of introspection.

NOW, “JUGAAD” IS A HINDI-URDU TERM FOR “improvised solutions born from ingenuity and cleverness.” It has also various subtle shades of meaning such as  “an innovative fix for a simple work-around, solutions that bend rules, or a resource that can be used as such, or a person who can solve a complicated issue.”  In an interesting aside, #Akarsh Mehrotra posted 51 photographs that “prove Indians are the ultimate kings of jugaad”.  The instances that he posted at http://www.scoopwhoop.com/humor/pic-of-jugaad/ can surely bring a smile on one’s face where the mantra is indeed to make the most of what one has.  He writes, ummeed pe duniya kayam hai aur India ki ummeed jugaad pe (“While the world rests on hope, India’s hope is on jugaad”).   Authors #Navi Radjou, #Jaideep Prabhu and #Simone Ahuja have penned a best-seller titled “Jugaad – Think Frugal, Be Flexible, Generate Breakthrough Growth” where the essential elements are (a) taking advantage of opportunity in adversity (b) doing more with less (c) thinking and acting flexibly (d) keeping it simple (e) including one’s margin and (f) following one’s heart.  By this token, jugaad should not be a bad thing, after all !  And the companies covered by the authors included, amongst others,  Google, Facebook, 3M, Apple, P&G, Pepsico !

ON THE OTHER HAND, JUGAAD HAS NEGATIVE connotations too.  #Dinesh Unnikrishnan, in First Post  wrote: “The average Indian entrepreneur has always ways of finding solutions to everything through quick fixes or jugaads – be it to escape the taxman, to get bank finance and not to repay it, or to show healthy balance sheets, even when things aren’t quite healthy.”  Rajan rightly went for the jugular on jugaad : “Jugaad or working around difficulties by hook or by crook is a thoroughly Indian way of coping but it is predicated on a difficult or impossible business environment. And it encourages an attitude of short cuts and evasions, none of which help final product or quality or sustainable economic growth.”  He pleaded earnestly for the resolution of fundamental structural issues of the economy and clearly told his audience that jugaad may no longer be needed if India had the discipline to stick to its strategy of building the necessary institutions and creating a path of sustainable growth. The audience was urged to think long term and abandon short term fixes.  In his inimitable words : ” India must resist special interest pleas for targeted stimulus, additional tax breaks and protections, directed credit, subventions and subsidies, all of which have historically rendered industry uncompetitive, government overextended, and the country incapable of regaining its rightful position amongst nations.”

RAJAN’S AUDIENCE COMPRISED OF BANKERS AND HIGH PROFILE Borrowers. His oration was a clear signal that the window dressing of bank balance sheets and the less than transparent restructuring of debt will no longer work.  Rs 60 Bn of tax payer’s money is already at risk.  A mere clamour for a reduction in bank rate would remain just a jugaad if the structural inadequacies are not immediately addressed.  At the end of the day, it was clear that Rajan did not at all use a misnomer – the jugaad he wanted his audience to abandon was the “impatience and pressure for quick impossible fixes.”

INDIA  IS LUCKY THAT IT HAS RAGHURAM RAJAN AS ITS CENTRAL BANKER.  He was grossly misjudged as a Luddite although he was the first to identify the Fault Lines* of the global economic system even before they imploded. He must be allowed to get on with his business sans jugaad, and without fear or reproach.

___________________________________________

*Fault Lines: How Hidden Fractures Still Threaten the World Economy

by  Raghuram Rajan (Princeton University Press) 

 

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