Raghuram Rajan (IITD85) is the next Governor of the Reserve Bank of India
UPDATE: Apparently, Mr. Rajan is the heat in a red-hot Sensex. If socialites are talking about bankers over tea and cakes and ices, does that mean you’ve gotten mainstream acceptance? Eitherway, Rajan is getting the markets fired up, as well as the ladies.
With recently imposed anachronistic capital controls and a crashing Rupee, Raghuram Rajan is all set to become the next captain of what many are calling a sinking ship!
While Rajan’s own credentials are superlative, the role that he is to adopt from the 4th of September, 2013 – that of the Governor of the Reserve Bank of India – may prove to be too limited. For, despite the wide-range of powers and responsibilities under the RBI’s purview, it is still largely limited to monetary matters. And no matter how innovative Rajan’s ideas may be, monetary policy still has to answer to the real economy.
And that is the domain of the stereotypical Indian politician
Nevertheless, the next governor is bringing with him a hefty resume, as both a star pupil and a top-notch policymaker in some of the most influential organizations in the world.
A graduate of IIT Delhi and IIM Ahmedabad, Rajan obtained gold medals as the most accomplished student in both institutions. He has a PhD from MIT in management. He became the youngest-ever chief economist at the IMF 2003, and was the inaugural recipient of the Fischer Black Prize for contributions to the theory and practice of finance by an economist under age 40 the same year.
In 2005, at a celebration of US Federal Reserve chairman Alan Greenspan, Rajan delivered a controversial paper that augured the 2008 financial crisis. This later became the backbone of his 2010 book, Faultlines, which won the Financial Times and Goldman Sachs Business Book of the Year Award.
Post-crisis, Rajan has argued for austerity as a means of alleviating economic woes in the EU, and has gotten in highly public spats with a number of other star-economists such as Paul Krugman in regards to that position.
In general, Rajan is viewed as being pragmatic in regards to monetary policy, and expectations are that he won’t deviate too much from Subbarao’s strategy for managing (mis-managing?) inflation. That, however, is unlikely to be the primary battleground.
What Rajan will need to content with are supply-side bottlenecks and legislative and bureaucratic paralysis that is liable to get worse as the 2014 general election beckons. He inherits the worst-performing currency in emerging Asia and an inflation level far above the 5 per cent that both he, and his predecessor, have publically stated that they are comfortable with.
He himself seems quite candid about the issues plaguing the country. In recent months, he has tended to speak in favor of pro-growth policies, as well as talking up the need to address the current account deficit. Despite these issues he has stated that “no one can have any doubt about the country’s promise.”
All in all, he seems like the best choice for a country that has seen its so-called spectacular future become more and more nebulous in the past few years, being pushed further away.
And the thing about dreams is that a dream deferred is a dream denied.