Can Raghuram Rajan, as the RBI Governor, lead the Indian economy out of crisis?

Posted On Sunday, Jan 01, 1950


Raghuram RajanThe Indian market was seen in a bad mood since May, 2013. Nothing really worked in favor of Sensex. May it be the falling rupee, soaring inflation or the plunging Sensex everything around brought dismay.

Nevertheless our former Governor Mr. Duvvuri Subbarao with his sound fundamentals of the banking system and strict supervision tried his best to bid adieu on a positive note, however the stubborn financial crisis refused to get resolved. Now all expectations were on the new torchbearer. Mr. Raghuram Rajan.

Earlier, when Rajan, a University of Chicago economist, was announced as our next Governor The Washington Post posted a blog that had a headline that said "Raghuram Rajan is India's new central banker. God help him". Likewise there was nervousness all around if he had all that it takes to take the responsibility of the world’s second most populous nation on his shoulders.

On September 4th, 2013 Subbarao stepped down as a the chief of Reserve Bank of India making way for Raghuram Rajan to become the 23rd Governor of the Reserve Bank of India. But as a very famous dialogue in the movie Spiderman goes "With great Powers Comes Great Responsibilities”, Rajan too has a tough balancing act to implement: arrest the rupee slide, cool inflation and spur growth. A task many economist describe as the central banks “impossible trilemma".

But the swearing-in of a new central bank governor seems to have raised hopes in the markets. Rajan was able to bring in some confidence in India's moribund financial sector with his well honed communication skills. At his first press conference as the Governor, Rajan emphasized on bringing transparency and stability to RBI’s monetary Policy. He came out with a slew of measures to modernise and liberalise the Indian banking system even while clearing the cobwebs of the past and started his innings with a sixer.

While there has been speculation that Rajan is not in favour of mid-quarter reviews and could dispense with the practice. For now all eyes will now be on September 20, 2013 when Rajan unveils the first monetary policy statement of his tenure.

At 50, with a global reputation as a top-notch academic, Rajan has kicked off his term on a positive note. Now let's wait and watch, how will Rajan navigate the terrain? Whether he succeeds in getting the currency and inflation under control or falls flat on our expectations.

Read Full Text: Raghuram Rajan's first speech as RBI governor

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Above article is authored by Quantum.

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