Ours is an age-driven society. Six years ago, I joined a talk-show with a teacher of mine. My dad felt I was pushing my teacher hard in the public domain and that the audience would not have liked it. My father’s advice was to avoid joining any talk-shows with that teacher of mine in the future, especially where there is a chance of possible debate.
The same thing happened just three months back with a regulatory body boss. He thought that I was still young and had a long way to go, and therefore I should refrain from criticising others’ work, including, of course, his.
On the other hand, Dr Manmohan Singh, the former Indian premier, thought that being joined exclusively by aged people like P Chidambaram, Montek Singh Ahluwalia, and C Rangarajan in the policy committees was not enough. India needed to bring in fresh ideas and introduce young blood to the economic policy-making space -- and thus a 44-year-old young man named Raghuram Rajan was invited to join the table and asked to put forth new ideas in terms of financial sector reforms.
An old article of mine, “Will India remember Manmohan Singh?” was manly based on my discussion with a taxi-wala in Delhi. The deemed-to-be-intelligent taxi-wala said to me: “Ab jo Rajan saab aya, kuch na kuch to hoga” (now that Mr Rajan has become the governor of RBI, something has to happen to stop the Rupee free-fall). And that’s exactly what had happened. Mr Raghuram Rajan, a former professor at Booth Business School with Chicago University and a chief economist for IMF, did take some unpopular, but strong, steps to bring back confidence into the system, especially from the foreign institutional investors (FIIs).
When stalwarts such as Chidambaram or Pranab Mukherjee, or even Manmohan Singh himself, were panicking, Rajan, within seven days of his taking over RBI, thought that the days of conservatism were numbered. India had become a “part and parcel” of the global economy, and thus, it had to behave accordingly. Unnecessary restrictions would send the wrong message to the global investor community.
Since then, Rajan has been on a strong batting stance. The Rupee has stabilised, inflation has gone down significantly, and India has come back to a sustainable growth trajectory. Analysts have posed increasing trust on the “India story.” Most importantly, we are hearing about continuous reforms -- even reforms taking place within RBI itself -- about how it would attack monetary policy, financial inclusion, m-commerce, and e-commerce.
Had it been 2006 or 2007, I would have gladly credited Manmohan Singh as being the saviour of India, or at least for putting the market reforms into action. But not now. Leading India with continuous economic reforms requires guts, and Rajan has that in spades. Even when one requires to dispassionately remind the very passionate Narendra Modi that export-led growth strategies, such as Make in India, may not work well all the time; instead, “Make for India” could’ve proven to be a better initiative.
It is also required that they go out of their way to tell a room full of journalists that the RBI “is not a cheerleader.” It’s not always about playing in accordance to the gallery. People also didn’t forget how fragile the Rupee was when he took charge and what he did to bring stability to it. He also has the clear visibility required in doing what he has to do going forward.
He was adjudged the “best central banker” in 2014, yet there was no big bang, no press release from his office, or even reports from major newspapers. This IIT Delhi engineering graduate, IIM Ahmadabad MBA, and an MIT PhD in banking has his priorities right -- to contribute towards the public policy-making for the largest democracy in the world. Rajan, along with Nouriel Roubini and Robert Shiller, were among the few economists who, to the utter dismay of FED boss Alan Greenspan, predicted the global financial meltdown in 2007.
Like all his IIM colleagues, Rajan works hard and fast too. He picked his mate Nachiket Mor to come up with ways to cover small businesses and low-income households. Mor came up with the idea of “payment banks” with an initial capital of Rs50cr that would only accept deposits and won’t do any lending. Now he is busy with putting up the framework for small loan banks to cater to the graduation needs of micro-borrowers. His review reports on Islamic banking and MFI should also help India to delineate a better charter for its future.
Rajan’s two biggest successes have been his continuous attack on inflation and stabilising the Rupee. But he should also be remembered for bringing in greater competition among banks by opening up the field, or for putting in mobile payment reforms or cleaning up the banking system from ballooning non-performing loans by reining in big defaulters.
His recent attack on state-owned banks, though it resulted in some unpopularity, would mean well for the future. The best part is, while Rajan was almost being shown the door -- being a UPA recruit -- Prime Minister Modi himself was praising the “Rajan reforms” quite a bit.
