Rexit: Taking note of Raghuram Rajan’s achievements as RBI governor


Raghuram Rajan: The hero India needed but not the one India deserved

Raghuram Rajan, perhaps the only ‘Rockstar’ in the world who is not an entertainer, commands an immense amount of respect globally for his strong grip on matters of economics. Taking the charge of the RBI Governor when the Indian economy was in a state of despair, Rajan has performed exceptionally well. His resume is too good to be true. Rajan graduated from the Indian Institute of Technology, Delhi (won the Director’s Gold Medal for best all-round achievement) in 1985 with a bachelor’s degree in Electrical Engineering, and completed the Post Graduate Diploma in Business Administration at the Indian Institute of Management, Ahmedabad (gold medalist) in 1987. He further went on to pursue a PhD in management from the Massachusetts Institute of Technology.

In a country where being politically correct is the most important criteria for holding a government post, Rajan has been outspoken, confident and affirmative in his policy decisions. This evidently didn’t augur well with the political honchos and has ultimately led Rajan to leave the post of the Governor. This post summarises his achievements as the RBI Chief.

  • The major task of the Central Bank is to roll out effective monetary policy so as to keep the inflation under control. Under his regime, the rate of inflation has fallen to around 5%, which is a little above the rate that is considered to be ‘healthy’ by economists for the development of a country. When he assumed office in 2013 the rate of inflation was exorbitantly high at around 11%.
  • He mentioned the following in his letter to RBI employees informing them about his will to move to academia once his term ends and I quote-

“When I took over, the Indian economy was labelled one of the ‘Fragile Five’, but today, we are the fastest growing large economy in the world, having long exited the ranks of the ‘Fragile Five’.”

This is sufficient proof of the kind of impact he has had on the growth prospects of India.

  • The foreign exchange reserves have reached an all time high and stand at $363.23 billion. The high amount of foreign exchange reserves is an indication of the fact that the country is prepared to face market shocks such as the devaluation of one or more currencies. It has also been traditionally used to back the country’s domestic currency.
  • When he began his stint as the Governor of the RBI, the rupee was in a free fall against the US Dollar. But, with sustained efforts, he was able to stabilise and strengthen the position of the Indian rupee.

Here’s a news clip from NDTV Profit:-

Dr Rajan took charge of India’s central bank in September 2013, when the country was in the midst of a currency crisis, with the rupee hitting a record low of 68.85 per dollar.

Within days of Dr Rajan’s appointment as RBI chief, the rupee stabilized, and later staged a dramatic reversal to rise to 61-62 per dollar by November 2013.

The strong rally in the rupee propelled the domestic stock markets to an all-time high in November 2013.

During Dr Rajan’s tenure as RBI governor, the rupee has outperformed its global peers.

  • Lower inflation and a stable rupee have also enabled Rajan to bring down the repo rate to a five-year low. Which has meant more freedom for banks to lend money and in turn more consumer spending.
  • Rajan also released on-tap licensing to ease the process of universal bank applications that enable services such as payments via mobile phones. The RBI has also given out Payments Bank Licences to 11 entities, a move that is set to revolutionise the banking sector as well as give a boost to the government’s aim of financial inclusion of the majority of the Indian population.
  • He has taken conscious efforts to clean up the bad bank loan mess. Indian banks now have close to Rs 6,00,000 crore bad loans. As banks struggle with record levels of distressed assets, Rajan had set an ambitious March 2017 deadline for them to fully reveal the problem loans and make adequate provisions. This was a very critical action on his part as bad loans threaten to disrupt the economic stability and can also lead huge crises (like the 2008 Lehman Brothers crisis).

His services and his pleasurable charm will be dearly missed!


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