Raghuram Rajan, the genius mind in the finance world. The whole world looks up to him. He was the 23rd Governor of RBI (Reserve Bank of India) from Sep 2013 to Sep 2016. Before that, he was the youngest Chief Economic Advisor at the IMF (International Monitory Fund). Raghuram Rajan served as CEA at the IMF from 2003 to 2006. He is the man who predicted the 2008 financial crisis & warned the whole world.
Currently, he is a professor at the Prestigious Chicago University.
In this article, we will discuss his early life to big achievements & significant steps taken by him. We will also discuss his thoughts on the current situation of India.
Early Life
Raghuram Rajan or Dr. Raghuram Govinda Rajan was brought into the world on 3rd February 1963 in Bhopal, Madhya Pradesh. He was born into a Tamil Brahmin Iyengar family. His dad R Govindarajan was an official in Research and Analysis Wing (R&AW). At 3 years old, his dad was posted in Indonesia. From that point forward, he was posted in Sri Lanka. Because of the political disturbance, he missed his one year of school.
From 1974 to 1981 Rajan went to Delhi Public School. At the age of 18, Raghuram Rajan cracked perhaps the hardest exam out there IIT’s. He was selected in IIT (Indian Institute of Technology) Delhi for a four-year college education in electrical engineering. He graduated in 1985 and was granted the Director’s Gold Medal as the best all-around understudy. In 1987, he procured a Master of Business Administration from the Indian Institute of Management Ahmedabad. Again he accomplished a gold Medal for scholarly execution.
He didn’t stop here. He left a prestigious job at Tata Administrative Services after getting hired for a few months. Then he joined the doctoral program at the Sloan School of Management at the Massachusetts Institute of Technology.
The career of Raghuram Rajan as Economist
CEA at International Monetary Fund
At the IMF, Rajan laid the foundation for incorporating monetary area investigation into the IMF’s financial nation models. He additionally drove a group to help some significant economies in diminishing the equilibrium of installments’ irregular characteristics. During Rajan’s residency, the IMF generally adhered to the old universality.
While he was approached to remain on as the central financial expert briefly term, Rajan left after one term as the University of Chicago showed that his leave couldn’t be broadened.
He served as an Economic Advisor to the Government of India
In November 2008, Indian Prime Minister Dr. Manmohan Singh delegated Rajan as a privileged monetary guide as an economic adviser. A job that elaborates composing strategy notes at Singh’s request.
In the yearly review, he encouraged the Govt. to decrease spending and subsidies and suggested the redirection of Indians from agriculture to the service and skilled manufacturing sector. He was additionally incredulous of the Food Security Bill considering the rising financial deficiencies.
The step was taken by Rajan as the Governor of Reserve Bank of India
As the RBI Governor, Rajan got an opportunity to execute or possibly seek after few means. His fundamental focus was to reduce the increasing inflation. He cut down retail inflation from 9.8% in September 2013 to 3.78% in July 2015. The most reduced since the 1990s. The wholesale inflation rate descended from 6.1% in September 2013 to 4.05% in July 2015.
Under his tenure, RBI embraced CPI (Consumer Price Index) as the critical marker of inflation. Worldwide it was taken way before us. RBI additionally authorized two general or universal banks and supported eleven payments banks to broaden banking administrations.
During his administration, he implemented two-factor validation of homegrown credit card exchanges or transactions to guarantee the security of clients. He additionally advanced Digital Banking.
Significant facts about Raghuram Rajan
Demonetization
In interviews in September 2017, Rajan said the Government of India had counseled the Reserve Bank of India, during his Governorship, on the issue of demonetization however never requested to settle on a choice.
According to Rajan, the Govt should have enough money printed in order to prevail transaction issues that occurred due to Demonetization. Rajan was not in for this historic step. He thought that India isn’t ready yet to take such a step, the nation needed to prepare a few things beforehand. Rajan also offered a time period that needed to prepare the precautions.
He said, “Having the truth out there is important“. According to him, one should have enough currency for replacing the banned one. At the time of Demonetization India was not that digitally active. Everyone couldn’t able to switch to electronic ways overnight.
2008 Financial Crisis
In 2005, when Dr. Raghuram Rajan was serving as the CEA at IMF, delivered a paper at the annual Jackson Hole. The most elite banking conference in the world. He delivered the paper named “Has Financial Development Made the World Riskier?” And the Conclusive answer he gave “Yes, it is.” Rajan’s Paper focused on an incentive structure that generated huge cash bonuses based on short-term profits. Which imposed no penalties for later losses. Rajan argued that this incentive encouraged them to take risks that might eventually destroy their own firms & even the entire financial system.
He added “It’s very easy to generate performances by taking on more risk and so what you need to do compensate for the risk-adjusted performance”
After the paper published the world’s top economists laughed about it. And today we all know why he warned & how he was particularly right about the 2008 Financial Crisis.
His thought on the Impacts of Covid-19 in India
Raghuram Rajan said in an interview that Coronavirus is most likely India’s most noteworthy challenge since freedom. India has seen the highest contraction of GDP since independence. He added “One of the impacts of the pandemic is, we don’t see the public authority presence for different reasons,”
According to him, “the main focus should be employments. In order to create more jobs, India has to invest in infra and other service-related sectors. India has to attract investment the right way. The impacts of covid have largely hit on Restaurant business, Travel & tourism business. Some of that will come back but some of it is permanently gone. When small enterprises or restaurants close they are not going to come in a hurry. So we have to think for a prolonged period of relatively weak employment unless we take serious action. Almost 10 million new labor force are coming every month.”
“India needs to vaccinate as quickly as possible to bring confidence in people. Containing the pandemic ASAP is what the country needs to think about first.”
His Thought on GDP of 2020-21
After overcoming the pandemic, if we have to go anywhere near the path of growth we had in the pre-pandemic, the nation has to think about repairing the economy. And while doing all these India needs to think about reforms that we need.
Although even at the end of the year even we grow at the projected growth rate of eight or nine percent, we will still be way below the level of 2015-2016. He suggested revising the “Growth Model“.