Raghuram Rajan
- A Tamilian who went on to win the respect of economists from every part of the globe. He may not have been born in Tamil Nadu, but that does not take the Tamilian out of him. If one happens to converse with him in Tamil, he would respond in Tamil with showing airs of his qualifications. He gracefully ignored the difficulties he had to face due to the backward thinking community he was born in.
- Raghuram Rajan is a Perfect Academician. He majored in Economics at IIT, in Management at IIM and completed his doctorate in MIT. He began his career in 1991, as a part-time economics professor in Chicago University. In 1995, he was offered a promotion as a full-time professor.
- Post-2000, he worked hard on research. His work gained national momentum!
- In 2005, he released a report titled ‘Has financial development made the world riskier?’ In this report, he warned the world that our activities in the name of development are going to land us in economic trouble. But his voice was disregarded. On this, Lawrence Summers commented ‘ He is a luddite.’ But, as Rajan predicted, 2008 saw an economic meltdown. Banks became bankrupt, companies had to resort to lay-offs. Instability was the scary monster that stared down at people. The world’s GDP dropped to 5. Unemployment rose to 10% at the global level.Experts felt that The Great Depression of 1930 had returned. But Raghuram Rajan did not use the chance to pull the limelight to his skillset. He quietly encouraged others to work together to find a solution. ‘The 2008 meltdown was unavoidable’ – this is an excerpt from ‘Inside Job’ movie released in 2010. This excerpt was based on Raghuram Rajan’s report.
- Government officers’ fear of speaking up against politicians has led to implementation of some drastic laws. But Raghuram Rajan did his job to the last letter and refused to bow down to any politician. The demonetisation which caused a flurry in the country was proposed when Raghuram Rajan was the Governor of the Reserve Bank. But Raghuram Rajan dismissed the proposal, saying that it is hard for the people to stomach such a big change. Demonetisation came into effect only after Raghuram Rajan’s tenure as the Reserve Bank Governor ended.
- Raghuram Rajan came up with the concept of Dosanomics. Dosanomics is a portmanteau consisting of the words ‘Dosa’ and ‘Economics’. But what does it mean? Dosanomics explains the benefits of lower inflation rate and interest rates to the general public. Let us say that you have started a Savings Account with a deposit of Rs 1 lakh, at an interest rate of 10% p.a. At the end of 1 year, you shall receive an interest of Rs 10,000. How many dosas can you buy with this interest? Assuming that 1 dosa costs Rs 55, you can buy 182 dosas. With the principal amount, you can buy 1818 dosas. This is a calculation based on 10% interest and 10% inflation. Now, let’s say the inflation rate drops to 5% and the interest rate drops to 8%. Now, the dosa’s price drops from Rs 55 to Rs 52. So the interest amount of Rs 8,000 can buy you 152 dosas. You may think ‘But this count is much less than the one we get when inflation & interest rate are high. Then how is it beneficial to us?’ Pause that thought and check how many dosas your principal amount can buy now. With 1 lakh, you can now buy 1923 dosas. Add that with the number of dosas your interest can buy – 1923 + 152 = 2075 dosas. This is much higher than the number of dosas you can buy when the inflation rate and interest rate are high. Rajan’s ability to explain such a difficult concept easily proves how skilled he is!
- Numbers are very important in Economics. From GDP to tax, everything is measured in numbers. Raghuram Rajan monitored the numbers closely with utmost attention. The slightest change would make him anticipate the consequence of such change. He opines ‘In economics, if one number decreases, it means that a new number is waiting to surprise us. So one should not feel discouraged by decreases or sudden changes.’
- The way a leader treats his team says how good a leader he is. By that measure, Raghuram Rajan was possibly one the best Governors our Reserve Bank has had. He held the post of Governor of the Reserve Bank from September 2013 to September 2016. At the end of his tenure, he was asked about his greatest regret in those 3 years. To this he replied, ‘I could not convince the Government to give the Reserve Bank employees the pension they deserve. That’s my greatest regret.’
- 3 years is not sufficient time for any Reserve Bank Governor to execute big plans. Many of the governors before Raghuram Rajan have had a 5-year tenure. But Raghuram Rajan contributed as much as he could in his 3-year tenure. Here are 3 of his greatest contributions. 1. Bringing down India’s inflation level. The inflation that was at 9.8% in September 2013 came down to 3.78% in July 2015. 2. He increased India’s Foreign Currency Reserve by 30%. When he stepped down as the Reserve Bank Governor in 2016, the foreign currency reserve stood at a whopping $380 Billion. 3. He granted the permits for 2 national banks and 11 mini banks. By doing so, he increased banking accessibility such that 2 thirds of the population could avail banking services.
- Raghuram Rajan is the first Reserve Bank Governor with a high public appearance rate. Every week he would appear on a show that discussed the country’s economics. He openly spoke about the country’s economic situation and the steps taken by the Reserve Bank to improve the country’s financial position. These open discussions did not sit well with the Government. He soon started receiving pressure to avoid appearing on open discussions and forums. But Raghuram Rajan firmly replied that the fact that he is a Government employee makes him accountable to the people. And that he was required by duty to inform them of what is happening in his department. It is at this juncture that he said ‘I am not only informing the people, I am also educating them.’
- Raghuram Rajan had an excellent knowledge of India’s industrial situation.Many manufacturing industries have taken a very authoritarian approach. But the service industry is not so. Service industry is accountable to the public. During his tenure, BSNL may not have reached its zenith, but it sure functioned without crumbling down.
- Generally, Government officers are known to use an authoritative approach. This is because they are selected through exams and not by way of merit of their services. But Raghuram Rajan shone differently than other Government officers. He believes that in an open society like India, the importance of Tolerance cannot be stressed enough. Here’s some info about him. His favourite sports personality is Roger Federer, his favourite actress is Debra Winger, his favourite film is ‘The Great Dictator’.
- One of his commonly used phrases is ‘I’m Raghuram Rajan. I do what I do.’ The compilation of his speeches is also titled ‘I do what I do’. True to the title, he does what he does.