Raghuram Rajan
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A profile
As the RBI Governor
Through tight monetary measures, he contained inflation, with consumer price inflation falling to an all-time low of 6.46 per cent and the wholesale price index easing to a five-year low of 2.38 per cent in September 2014.
He successfully tackled India's currency crisis, rescuing the rupee from its historic low of 68.83 against the dollar in August 2013 to 61.7 as on November 7, 2014.
He won the Director's Gold Medal at IIT-Delhi and was a gold medallist at IIM-Ahmedabad. He was given the Central Bank Governor of the Year 2014 award by Euromoney magazine for stabilising the rupee.
Seeking support : “I seek the blessings of all citizens of India.May they give me the courage and highest stride.”
Bouncing back : He said, “I think over the course of this year, we will be solidly in the 5 per cent growth range and by next year we should be in the 6 per cent range.”
Reforms
The Times of India, Jun 20 2016
Rajan's `100 small steps' basis for big bank reforms
Mayur Shetty
In the absence of any explanation from the RBI governor or the government, Raghuram Rajan's decision to walk away from a second term is widely seen to be triggered by differences between the two. But this is ironic considering that the genesis of most of the Narendra Modi government's banking reforms is a 2008 report authored by Rajan. Also, Rajan has done more to iron out the historical differences between the central bank and the government, which reached its peak under his predecessor D Subbarao, and created a framework where both would work together on policy .
In the hype surrounding the announcement of the `Indradhanush' reforms in public sector banking, what seems to have been lost is origin of most of the measures.
The reform road map for the public sector banks (PSBs) includes proposals such as a holding company for PSU banks, strengthening of bank boards, privatization of small PSBs, the push on financial inclusion and inflation targeting by the central bank. Incidentally , all of The only possible area of difference that appears to be left behind is Rajan's freethinking approach to communication. Comments on issues such as tolerance which had taken a political dimension appear to have made many in the finance ministry uncomfortable. Also, Rajan's decision to force banks into classifying loans as being in default was seen by many as an adversarial stance aimed at forcing the government to take some decisions.
As to the purported differences between the governor and the government on interest rates, none of that is new . Former RBI governor D Subbarao had sparred with both the finance ministers during his term -Pranab Mukherjee and P Chidambaram. The differences spilled over to public discourse as well and made its way into Subbarao's last speech. Rajan's term, if anything, has helped bridge the gap by agreeing to a monetary policy framework where RBI members and government nominees would have equal say . The reports of the technical advisory committee indicate that the external members are less hawkish on interest rates. In the past, even the top rung of RBI did not speak in one voice on interest rates with former deputy governor Subir Gokarn sending different signals from the governor.
There was also media speculation that the government's decision to have a panel headed by a bureaucrat irked the governor. According to sources in the RBI, the government always had its own views on appointing a deputy governor. Former governor D Subbarao is understood to have made a strong pitch for a second term for both his deputies -Subir Gokarn and Usha Thorat.
RBI and the government
The Times of India, Jun 20 2016
Sense of unease lurked below surface The Reserve Bank of India (RBI) and the government may not have gone public with their differences in recent months, but there were several issues which divided them and finally resulted in Raghuram Rajan's decision to rule himself out for a second term. During the initial months of the NDA regime, there had been occasions when government functionaries had spoken about the need to cut interest rates to prod the central bank. This made way for several exchanges on key issues -ranging from a monetary policy panel and the inflation target to managing government borrowings -where some strong words were used.
While things seemed to have settled down, at least on the surface, the government was not completely at ease with the way the RBI under Rajan had dealt with several issues and remained dissatisfied with the pace of interest rate reduction, slow growth in lending and stress in the small and medium scale sector.
There is a strong view in the government that the RBI has been “behind the curve“ in reducing interest rates and this has hurt the SME sector and higher rates were more beneficial to foreign institutional investors rather than the domestic market.
The sluggish growth in lending has been a serious concern for the government as it frets over inadequate private investment and is trying to get the economy moving through higher public spending to make up for low capital expenditure by India Inc.
Rajan's frequent pronouncements on a range of issues from the intolerance debate to the comments on India being a “one-eyed king in the land of the blind“ did get the government's goat though it chose to hold its breath on most provocations.
A former RBI governor felt Rajan's comments on issues not related to his remit were a transgression of norms that guide the office. Others, however, felt that while he has pushed the limits, his standing made him eligible to speak on domestic and international developments. His stature helped India, rather than impede it.
What did bother Rajan, it would seem, was the lack of outright condemnation of Rajya Sabha MP Subramanian Swamy's diatribes, accusing the RBI governor of extraterritorial loyalities and of leaking official communication.
The decision that a cabi secretary-headed committee will shortlist candidates for the RBI governor's post and will examine possible choices, including the incumbent, went down poorly at the central bank. In the past, such a decision was essentially taken by Prime Ministers, sometimes in consultation with finance ministers.
Earlier, the process for the selection of the RBI deputy governor was also changed.Previously , the RBI governor headed the selection process, but this time around he was a member of the committee headed by the cabinet secretary .The government maintains the financial sector regulatory appointment search committee (FSRASC) was set up some time back in accordance with the recommendation of previous panels.
There is also an impression that the governor's “star status“ did not find adequate resonance in the government. The tendency in the government has been to see the RBI as part of the team that is involved in the management of the economy .
