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Updated: August 7, 2013 04:05 IST

A reformist-economist to play central banker

Ashok Dasgupta
Comment (17)   ·   print   ·   T  T  
Illustration: R. Rajesh
The Hindu
Illustration: R. Rajesh

Raghuram Rajan is known throughout the world for his forthright and frank views

The appointment of Chief Economic Advisor Raghuram G. Rajan as the next Reserve Bank of India Governor after D. Subbarao completes his tenure on September 4 has been hailed by one and all, particularly India Inc. which has been at the receiving end of the perceived hawkish policy pursued so far by the central bank. Prime Minister’s Economic Advisory Council Chairman C. Rangarajan has also lauded Dr. Rajan’s selection as an ‘excellent’ choice.

And, not without reason. Dr. Rajan, who was Economic Advisor to Prime Minister Manmohan Singh in an honorary capacity and took over as CEA in the Finance Ministry in August last year, is known throughout the world for his forthright and frank views. Widely acclaimed — through initially criticised — for accurately predicting the global meltdown of 2008, Dr. Rajan had foreseen as early as in 2005 that a crisis in the financial sector was looming large.

An alumni of IIM Ahmedabad and IIT Delhi, Dr. Rajan, born in 1963 in Bhopal, went on to complete his doctorate from the Massachusetts Institute of Technology and was professor at the University of Chicago’s Booth School of Business before taking over as CEA. During his short stint as CEA, Dr. Rajan was also actively engaged in authoring the report on financial sector reforms that was commissioned by the Planning Commission.

Wealth of experience

In fact, Dr. Rajan is one among very few Indian economists who risked criticizing the U.S. financial system at the prime of his career and warned against the potential catastrophes. Having gained a wealth of experience and broad and analytic perspective on how systems work, he came up with controversial papers chaffing the finance sector. After an initial few brickbats, his views and implications on the flaws of the financial sector were later noticed when he managed to prove himself as right.

Savour this. On why stimulus has failed, Dr. Rajan, in one of his columns said: “Advanced countries will spend decades working off high public debt loads while their central banks will have to unwind bloated balance sheets and back off from promises of support that markets have come to rely on.’’

On the role of central banks, he said, in another write-up: “Quantitative easing has truly been a step in the dark. Given all the uncertainty, why have central bankers, for whom ‘innovative’ is actually an epithet, departed from their usual conservatism in adopting it?’

Back home, on why India slowed down, Dr. Rajan said: “To revive growth in the short run, India must improve supply, which means shifting from consumption to investment. It must do so by creating new, transparent institutions and processes, which would limit adverse political reaction.”

The best person

Welcoming his appointment, Dr. Rangarajan, a former RBI Governor himself, said: “Rajan will make an excellent Governor at the moment” as he has been dealing with the problems in the last one year. Planning Commission Deputy Chairman Montek Singh Ahluwalia also noted that Dr. Rajan is coming in at a tough time but he has a terrific academic and professional background.

“It’s a very tough time, we need someone who can give direction...the important thing is giving leadership for the next five years on how should the Indian financial system move. I think Rajan will be the best person to do that,” he said.

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Lets all try to support Dr.Rajan. Its possible that the rampant pettiness in India will
mow him down as one commenter observes but he should be given all possible
support to bring India on par with China and the ASEAN countries if nothing else.

from:  Sumant Rawat
Posted on: Aug 8, 2013 at 04:21 IST

On behalf of millions of Indian people, I wish Prof. Rajan all the very best with the fond hope that he will translate his vast experience into sustained benefits for the country.

from:  Ramaswamy Narayanan
Posted on: Aug 7, 2013 at 20:38 IST

P V Narasimha Rao made one Economist a Finance Minister and Sonia
promoted him to PM's gadi . Now almost all people feel the pinch of rise
in cost of living and it is difficult to lead a Normal Life by a
commoner . Only politicians are benefited by SCAM REGIME . I equally
feel that another Economist will push most of us into BPL category .

from:  Prof R Krishnamurthy
Posted on: Aug 7, 2013 at 20:00 IST

Dr. Rajan has been hailed as an excellent choice for the new post for
his academic and professional talents, by people who know things much
better than the common man (like me). What is surprising to me is that
this great person has been in the Indian financial scene for quite
sometime now; but this sector has seen only the negative side in all
fronts; be it in controlling inflation, sliding value of the rupee,
GDP growth etc. What is the real relationship of his talents with
these achievements? Or else I should reserve my comment till he takes
up the new post and given some breathing time?

from:  D. Darwin Albert Raj
Posted on: Aug 7, 2013 at 19:05 IST

If he is let free to perform his duties ...he can do justice to the role....Lets not hinder potential people like what has happened in UP

from:  Lokvikyath
Posted on: Aug 7, 2013 at 19:00 IST

Unlike other countries, it is very difficult for anybody to succeed in
India except political leaders who live in deceit and corruption. We
are seeing Nilekani struggling with Aadhar cards. When he quits, he
should write a book. Similarly, no breakthrough is expected with Raghu
Rajan too. One wonders how a man who put his best efforts on American
soil can imbibe or tolerate the Indian tricks one has to encounter day
in and day out. Unless Indians give up their lust for money, craze for
gold, visiting temples often, things do not change. VOTE is a precious
tool in democracy and till we realize it no bright future for nation.

from:  Vyas K Susarla
Posted on: Aug 7, 2013 at 16:57 IST

Manmohan Singh has a equally good profile and has done little in the last 4 years for socio-economic reform of India. I expect Dr. Rajan to be mowed down by red tape - whether he positively responds to it will be interesting to see in the next 3 years.

from:  Sri
Posted on: Aug 7, 2013 at 16:16 IST

Subbarao was Pranab Mukherjee's call and Rajan is Chindambaram's call. Only time will tell who is correct (not right).
So people please don't jump the gun.....reputation is only as good as the previous day.

from:  Praveen Nair
Posted on: Aug 7, 2013 at 14:18 IST

Looking at the credentials and the experience that Mr.Rajan holds, he is
the right man to lead the RBI. Wish him all the best! and hope that he
will not be "another" RBI head but will make a difference from the rest.

from:  kiran kumar
Posted on: Aug 7, 2013 at 10:59 IST

NICE to read the Biodata. As HEAD of the Prime Finance Setup, with enormous power[i presume] Dr.Rajan must work for "breakthrough's" in reforms needed to put India at financial equation- “ one Dollar EQUALS One Rupee” - model which every other developing country can "mimic".He should become a role-model for future Economists/Finance specialists in India. Get rid of "Me too / yes Sir / cut-paste" culture-frame of mind and we all hope is NEW DAWN is beginning! BEST WISHES

from:  Dr B S Sudhindra
Posted on: Aug 7, 2013 at 10:32 IST

Yes he can make qualitative improvement provided govt implement all
well meaning suggestions Populist freebies should be stopped
,infrastructure bottlenecks should be removed,public services
should be improved and free food etc should be given to targeted
25% of population .In short politicians must behave themselves
otherwise this or that RB governor can do very little with or
without reputation.

from:  ramakrishnan s
Posted on: Aug 7, 2013 at 09:53 IST

NICE to read the Biodata. As HEAD of the Prime Finance Setup, with enormous power[i presume] Dr.Rajan must work for "breakthrough's" in reforms needed to put India at financial equation- one Dollar EQUALS One Rupee- model which every other developing country can "mimic".
He should become a role-model for future Economists/Finance specialists in India. Get rid of "Me too / yes Sir / cut-paste" culture-frame of mind and we all hope is NEW DAWN is beginning! BEST WISHES

from:  Dr B S Sudhindra
Posted on: Aug 7, 2013 at 09:41 IST

Rajan is, no doubt, one of the most qualified guys to take on the
mantle of the RBI Governor's post. From what has been observed of him,
he seems to be a man who has moderate views on most things. The big
question is, how much, in the next few months will he actually be able
to translate his ideas into something substantial. It will be quite
interesting to see how he goes about his work. Not just interesting,
its imperative or the economy he gets it done.

from:  Aniroodh Ayyangar
Posted on: Aug 7, 2013 at 09:38 IST

May be we had enough of this oxbridge-mit-iit-iim combo
economists being at the helm. What difference did manmohan
singhs, chidambarams, monteks do to the Indian economy for
the past few years? I think the RBI governors who grew from
Indian grassroots did us well. How sane is the choice to not
to hire someone from within RBI. We need a RBI governor who
can keep government spending under check while also paving
way for efficient spending. Will a pick sitting next to
manmohans and monteks of big government be able to stand up
to government inefficiencies and speak up? Is this the start
of a path for the RBI becoming a state instrument and
therefore political instrument? What next? CAG?

from:  dheeraj k
Posted on: Aug 7, 2013 at 08:02 IST

Hope his experience and education helps india though tough time ....

from:  k gaipal
Posted on: Aug 7, 2013 at 07:48 IST

I have read "Fault Lines" by Raghuram Rajan. It is one of the finest
books which explained the root causes of recession. He explained clearly
that it was not just few years mistakes, but it was results for couple
of years of wrong doings... I am sure he will do a great job in coming
years. I wish the political parties support him. God bless Raghuram

from:  Rajesh
Posted on: Aug 7, 2013 at 07:00 IST

By the way, Raghuram Rajan is a naturalized American citizen. Can a foreign citizen hold the post of governor of RBI? Wouldn't he be more sympathetic to American interests rather than Indian interests?

from:  K. Raghunathan
Posted on: Aug 7, 2013 at 03:49 IST
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