Jaitley brings differences with RBI chief Rajan to the fore

Cracks in the relationship between RBI governor Raghuram Rajan and the BJP-led union government are increasingly beginning to show as finance minister Arun Jaitley today firmly rejected Rajan's mild critique earlier this week of Prime Minister Narendra Modi's much-touted 'Make in India' programme.

Rajan had suggested that India should concentrate on increasing production for the domestic market rather than for exports. But Jaitley said it is about manufacturing of quality products at low cost, and it was not relevant whether these products are sold in India or abroad.

"Whether Make in India is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and of good quality. They [also] hire services which are cheaper and good quality," Jaitley said.

In recent weeks, Rajan has sounded sceptical of the government's campaign, saying it assumes an export-led growth path as of China will work for India – which in fact most economists would agree is unlikely.

Rajan has suggested it should rather be 'Make for India' with a focus on manufacturing products for the domestic market.

Speaking at a "Make in India' event in Delhi, Jaitley said the manufacturing sector will continue to face challenges unless it ''transitions'' itself while keeping quality and price in mind.

Rajan had said he was "cautioning against picking a particular sector such as manufacturing for encouragement'', simply because it has worked well for China.

"India is different, and developing at a different time, and we should be agnostic about what will work," he had said.

Rajan was appointed by the previous Manmohan Singh government. He has held his post under the new government largely due to pressure from finance and industry in India and abroad, which appreciates his professional approach.

The question now seems to be how long he will last before he is replaced by more of a 'yes man'.