Why I like Shri. Raghuram Rajan

Other than the fact that he has an extremely impressive resume (past achievements include being the Chief Economist at IMF, Chief Economic Adviser to India’s Ministry of Finance, PhD from MIT, Gold Medalist @ IIM-Ahmedabad and IIT-Delhi), it finally seems like we have an RBI Governor, who is acting like a real, thinking person.

I don’t go by past achievements (our last PM had an impressive resume as well), but by the actions in the present and the now. Suddenly, everybody knows who the RBI Governor is and that he seems to be acting independently of (or maybe against) the wishes of the Ministry of Finance (MoF) in his workings at the office. Finally, we have an RBI Governor who is doing what he believes to be right and is neither being influenced by what the Government says nor trying to be popular among the masses.

When he joined office, he said his main focus was to rein inflation. And that he did. He did not announce the immediate rate cuts that the Ministry of Finance kept hoping for (as a populist measure). And since it’s been quite a while that RBI and MoF have been at loggerheads, the Financial Services Legislative Reforms Commission (FSLRC) has suggested setting up a Monetary Policy Committee to decide on the interest rates. It’s composition and when it would come into force, is still being discussed, but it seems like an attempt to check the autonomy of the Central Bank in deciding the interest rates.

The rates were kept unchanged in the latest review. But with all that has happened in this current month - monsoon shortfall nos. coming in, China induced jitter in the world markets, onion prices rising again – to me it seems that it was good thinking after all. MoF might not think likewise. But it does not matter. What I, as a common citizen, can see is that inflation has been pretty much under control in the past year and that even with the China issue breaking out, markets don’t seem to be on a complete nosedive – it’s jittery and fluctuating alright, but nothing to bring the whole system down. There seems to be some stability in the Indian economy. And the Central Bank deserves at least some credit for it.

More than the BJP, the people voted for Shri. Narendra Modi. It’s the people at the helm that bring in the involvement from the masses. I believe we have a good man at the helm of our Central Bank now. 

Suggested Links:
Raghuram Rajan’s Common Man Theory on Inflation
Accountability with Autonomy - a good article on the Monetary Policy Committee by Shri. C. Rangarajan, ex-Governor of RBI
Across the Aisle – Monetary policy committee: vote or veto? - P. Chidambaram's opinion on the Monetary Policy Committee
All the bank's men - About the people who make the structures
Raghuram Rajan keeps interest rates unchanged but raises hope of cuts
Government steps up rate cut pressure on Reserve Bank of India as economy struggles