IIT-Delhi alumnus Raghuram Rajan says he has no magic wand
Internationally renowned economist Raghuram Rajan who took over on Wednesday as Reserve Bank of India (RBI) Governor and plunge straight into a fire-fight situation as the country battles a rapid fall in rupee, high inflation, low growth and burgeoning current account deficit (CAD).
50-year-old Rajan, a former chief economist with the International Monetary Fund (IMF) who was economic advisor to the finance ministry, has taken over a difficult assignment from Duvvuri Subbarao on his completing five years in Mint Road.
An alumnus of the Indian Institute of Technology (IIT) in New Delhi, the Indian Institute of Management (IIM) at Ahmedabad and the Massachusetts Institute of Technology, and a gold-medallist all through, Rajan was the youngest economic-counsellor and chief economist at the IMF from October 2003 to December 2006.
Rajan has already said that he has no magic wand to face the challenge before the country but would deal with them one at a time.
The Government, which was at the receiving end of Subbarao's unrelenting focus on inflation control at the cost of low interest rates, would hope that the new incumbent would reverse some of those policies.
"We have enough ideas. It is not just the currency, it is financial inclusion, it is growth. I think there is a lot to do. There are challenges in the economy... These things are not going to be overcome overnight. There is no magic wand.
But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it.
"We will do it one step at a time. Make sure that it progresses everyday," he told reporters Monday on his last day of office at the Finance Ministry.
Rajan, who was appointed as the Chief Economic Advisor in the Finance Ministry in August last year, brings to RBI a vast experience gained at the IMF and during the brief stint in the government.
Known for his frank views, Rajan, who will be the 23rd Governor of the RBI, was acclaimed for predicting the 2008 global financial crisis. In 2005, he had delivered a lecture critical of the financial sector, arguing that a financial disaster might be looming.
Within days of moving to Mint Street in Mumbai in September 2008 from the North Block where he was Finance Secretary, Subbarao had to face the emerging financial meltdown, the worst world had witnessed since the 'Great Depression' of 1930s.
India came out largely unscathed from it mainly because of the sound fundamentals of the banking system and strict supervision by the RBI. But what Subbarao will most be remembered for will be the tough monetary stand that he took during the last one and half years when inflation was rising on one hand and economic growth stumbling on the other.
Under his leadership, the RBI raised policy rates 13 times between March, 2010 and October, 2011, testing the government's patience. RBI's tough stance brought down wholesale inflation from double digits in 2010-11 to around 5 per cent now and core inflation declined to around 2 per cent.
Subbarao's unrelenting focus earned the ire of those in the government with Finance Minister P Chidambaram even remarking once that if the government has to walk the path of growth alone, it was prepared to do so.
Top bankers hailed the contributions of Subbarao saying he did his best during a tenure that was marked by difficulties.
"I think the Governor's (five year) term has been in one of the most difficult environments globally and domestically.
If you look at the world and our country today, there is so much change that you have to be at your feet and I can't imagine anybody else doing a better job (than Subbarao)," Axis Bank Managing Director and Chief Executive Shikha Sharma said.
State Bank of India Chairman Pratip Chaudhuri said Subbaro "reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant".
"I've the highest respect for him. He has been through difficult times and let's put it this way: in hindsight, its very easy to judge anybody...I do believe he did a great job," Aditya Puri, who heads the second largest private lender HDFC Bank, said.
An alumnus of the Indian Institute of Technology (IIT) in New Delhi, the Indian Institute of Management (IIM) at Ahmedabad and the Massachusetts Institute of Technology, and a gold-medallist all through, Rajan was the youngest economic-counsellor and chief economist at the IMF from October 2003 to December 2006.
Rajan has already said that he has no magic wand to face the challenge before the country but would deal with them one at a time.
The Government, which was at the receiving end of Subbarao's unrelenting focus on inflation control at the cost of low interest rates, would hope that the new incumbent would reverse some of those policies.
"We have enough ideas. It is not just the currency, it is financial inclusion, it is growth. I think there is a lot to do. There are challenges in the economy... These things are not going to be overcome overnight. There is no magic wand.
But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it.
"We will do it one step at a time. Make sure that it progresses everyday," he told reporters Monday on his last day of office at the Finance Ministry.
Rajan, who was appointed as the Chief Economic Advisor in the Finance Ministry in August last year, brings to RBI a vast experience gained at the IMF and during the brief stint in the government.
Known for his frank views, Rajan, who will be the 23rd Governor of the RBI, was acclaimed for predicting the 2008 global financial crisis. In 2005, he had delivered a lecture critical of the financial sector, arguing that a financial disaster might be looming.
Within days of moving to Mint Street in Mumbai in September 2008 from the North Block where he was Finance Secretary, Subbarao had to face the emerging financial meltdown, the worst world had witnessed since the 'Great Depression' of 1930s.
India came out largely unscathed from it mainly because of the sound fundamentals of the banking system and strict supervision by the RBI. But what Subbarao will most be remembered for will be the tough monetary stand that he took during the last one and half years when inflation was rising on one hand and economic growth stumbling on the other.
Under his leadership, the RBI raised policy rates 13 times between March, 2010 and October, 2011, testing the government's patience. RBI's tough stance brought down wholesale inflation from double digits in 2010-11 to around 5 per cent now and core inflation declined to around 2 per cent.
Subbarao's unrelenting focus earned the ire of those in the government with Finance Minister P Chidambaram even remarking once that if the government has to walk the path of growth alone, it was prepared to do so.
Top bankers hailed the contributions of Subbarao saying he did his best during a tenure that was marked by difficulties.
"I think the Governor's (five year) term has been in one of the most difficult environments globally and domestically.
If you look at the world and our country today, there is so much change that you have to be at your feet and I can't imagine anybody else doing a better job (than Subbarao)," Axis Bank Managing Director and Chief Executive Shikha Sharma said.
State Bank of India Chairman Pratip Chaudhuri said Subbaro "reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant".
"I've the highest respect for him. He has been through difficult times and let's put it this way: in hindsight, its very easy to judge anybody...I do believe he did a great job," Aditya Puri, who heads the second largest private lender HDFC Bank, said.
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