Katju, who is now the Chairman of Press Council of India, criticised the admirers of India-born author based in Britain, saying they suffered from "colonial inferiority complex" that a writer living abroad has to be great.
"Salman Rushdie dominated the Jaipur Literature Festival. I do not wish to get into the controversy whether banning him was correct or not. I am raising a much more fundamental issue," he said in a statement here.
"I have read some of Rushdie's works and am of the opinion that he is a poor writer, and but for 'Satanic Verses' would have remained largely unknown. Even 'Midnight's Children' is hardly great literature," Katju contended.
He went on to add that the "whole problem with the so-called educated Indians of today is that they still suffer from the colonial inferiority complex. So whoever lives in London and New York must be a great writer, while writers living in India are inferior."
On the controversy surrounding Rushdie during the festival which ended yesterday, he said, "I am not in favour of religious obscurantism. But neither do I wish to elevate a sub-standard writer into a hero."
Referring to the Jaipur festival, Katju said one would have expected "serious discussion on literature, particularly indigenous literature" of the likes of Kabir, Premchand, Sharat Chandra, Manto, Ghalib, Faiz, Kazi Nazrul Islam and Subramania Bharti.
"Kabir and Tulsidas are no good because they lived on the ghats of Benaras, whereas Rushdie is great because he lives on the ghats of the Thames! This is the mental level of our 'intellectuals and 'literati'," the former SC judge said.
Katju maintained that the whole history of the great Indian literature, rich in its variety, from Valmiki and Vyas to modern times should have been discussed.
There could also have been a discussion on foreign writers like Dickens, Shaw, Victor Hugo, Balzac, Flaubert, Upton Sinclair, Dostoevsky, Tolstoy, Gorki and Pablo Neruda, he said.
"Instead the total focus at Jaipur appeared to be Rushdie. Two personalities linked with films were projected as 'the finest poets' in India, though to my mind their work is of a very inferior order. This is the low level to which the Jaipur Festival sank," Katju contended.
He said India is facing massive socio-economic problems today and literature should address these.
"The struggle which Kabir waged against narrow sectarianism, which Sharat Chandra waged against the caste system and women's oppression, which Faiz waged against despotism, which Subramania Bharti waged for nationalism and women's emancipation, which Dickens and Gorki waged against exploitation and social injustice - these are the matters which should have been discussed at Jaipur. Instead, Rushdie dominated most of the show," he said.