History will judge you kindly...

Whenever I think about a central banker many things come to my mind but the most shivering one is 2008 financial crisis. As a student of economics and keen learner; based upon my readings till date, nothing hesitates me to comprehend it like this, that, for a financial system as a whole and its bond with the masses at large is sort of invisible but not something which can be ignored; and a central bankers from all over the world are kind of High Septons of this holy bond.

Alan Greenspan; the second-longest serving chair of US Federal reserve; a ‘rock star’ like figure in world financial markets; when came to my knowledge, it was in relation with the US subprime mortgage crisis and it was the same time when I have started knowing little about Indian and world financial systems. Dr. Raghuram Rajan was the first RBI Governor whom I have experienced attentively through news papers and his lectures. It was really fascinating to see him in Inside Job, the Academy Award-winning documentary on 2008 Financial Crisis, where I got to know that Dr. Rajan way back in 2005 wrote an academic paper titled ‘Has Financial Development Made the World Riskier?’ for which he was criticised by giants like Alan Greenspan and Paul Krugman on several occasions, nevertheless many economists held Alan Greenspan’s tenures itself liable for letting the crisis born in US markets. And for someone like Dr. Rajan It really takes courage to do the Job of a central banker with integrity, and especially at a point when people are betting high on the horse which you are riding i.e. the Indian Economy.

As far as I can recollect, the last time I read about rock star central bankers, it was either Greenspan or Manmohan Singh; but today when I read The Washington Post’s article titled ‘India’s ‘rock star’ central banker quits, and his fans are devastated’; I was really devastated. Now assuming my views would be biased because of the fascination I had for Dr. Rajan and his working, but looking at the fact that a central banker (RBI Governor in case of India) has a prime job of making a monetary policy work in a way which will keep the Jobs in, inflation out and rupee-dollar dilemma in control; the long term assessment of his work will satisfy all these three pre-requisites of running RBI. His vision, no doubt with seamless government efforts has managed to see the highest growth in our USD reserves, our Current account deficit is down to 1.3% of the GDP form 5%, he has set two remarkable conventions at RBI; first, was the inflation targeting i.e. Monetary Policy Framework whose functioning will be focused majorly upon the rate of inflation; this move was remarkable because today staples like Wheat and Rice or vegetables like tomato, potato and onion or say Sugar and edible oil they consist of around 50% weightage in CPI inflation index, therefore making inflation core of a monetary policy was important. In his regime Retail Inflation came down to 5.39% form 9.8%, a remarkable drop in single digits. Second was about Indian Banking sector and as a man of finance, Dr. Rajan hit at the core of banking sector, their balance sheets were brought into focus, all the fuss we hear about NPAs (Non performing assets) is a by-product of his efforts only.

It is very rare to see the central banker who is hitting hard upon corporates and conglomerates for asking them to pay back their dues; whereas looking at the US financial industry, these corporates are prospective employers for post retirement jobs to these central bankers and nobody hurts them. But a stubborn man; once said “my name is Raghuram Rajan, and I do what I do”, for him it was all foreseeable, I still remember, in an interview with The Economic Times he once said that “three factors — land, natural resources, and government contracts or licenses — are the predominant sources of the wealth of our billionaires. And all of these factors come from the government”. No doubt that still there will be some for whom the ideas of Raghuram Rajan are not being as comfortable as it should be, and only God knows that due to their virtues or for something else; the incumbent government is not interested in keeping him in that office.

While calling Indian economy as “the one-eyed man being king in the land of the blind”; Dr. Rajan was trying to be as optimistic as reality could let him, it is beyond doubt that India is the only large economy which has managed to keep it pace of growth satisfactorily moderate, but at the same time no one can deny the fact the many giants, capable of bigger economic miracles are somehow slowing down, and on several occasions Dr. Rajan has hinted that India needs to get ready for this global slowdown as well as prepare itself to dodge the bullets in form of low global demand for Indian exports, market volatility threats like Brexit, heavy reliance on foreign investment to finance our growth ambitions and bigger issues like NPAs at home. But the Triumphalism of Modi government does not permit you to talk of reality, for them to maintain power it is very much necessary to live and force others to live in sort of euphoria, and suddenly people like Dr. Rajan becomes “mentally not fully Indian”, and our PM instead of defending his RBI governor gives the statement that his re-appointment should not be the subject of media discussions.

Always getting targeted by government for not cutting interest rates as per it’s whims and fancies; Dr. Rajan was able to cut interest rates by 150 basis points along with arresting inflation at around 5 % as well as recording highest ever forex reserves was few of his accomplishments the incumbent government will never appreciate. Even though he was one of the few to predict the 2008 financial crisis, I agree with Mr. P Chidambaram that, “...government did not deserve Dr. Rajan. Nevertheless, India is the loser”