5 reasons why we need Raghuram Rajan
Investors are soon expecting a market meltdown as Raghuram Rajan, the head of Reserve Bank of India, comes close to concluding his term. The man steering the Indian economy through volatile Indian stock and currency markets, is due to end his three year-term in September, 2016. Though he may not be reappointed, but analysts and investors are keeping their fingers crossed, maintaining Rajan's stay in a tight suspense. If Rajan leaves the office, that could result in a sharp decline in stocks and rupee's value in the upcoming months. Let's look at our giant neighbour - China, where economy grew only by 6.9 per cent in 2015, compared with 7.3 per cent in 2014, marking country's lowest growth in a quarter of a century. That poses a serious threat to India's economy in 2016. India simply needs the last hurrah to keep its economy rolling and that is, Raghuram Rajan.
1. Reliable
Markets have shown tremendous amount of trust on him. Dharmakirti Joshi, chief economist at Indian market research company Crisil, called him one of the "world's most capable central bank chiefs". Soon after taking the office, Rajan released a set of financial measures to stop the devaluation of Indian currency. He also announced a series of interest rate increases.
2. Rajan effect
Before Rajan took the charge as RBI head, the Indian Rupee was dubbed amongst the "fragile five" currencies in the world. Not only he managed to stabilise the devaluation of rupee, but also, introduced measures to check rising food prices. Analysts termed this the "Rajan effect".
3. Agile approach
In 2015, Indian markets saw worrying signs of economic slowdown, thus Rajan and his team swiftly decided to cut down interest rates. India's key Sensex stock showed a 60 per cent increase and the shares in State Bank of India gained a whopping 130 per cent after Rajan took the office. During the monetary policy meeting on December 1, Rajan kept its policy rate unchanged, calling India's economy "strong" enough to ride out the Fed's move.
4. Works under pressure
Since the time Rajan has been appointed as RBI head, there has been a tense relationship between RBI and the Union finance ministry. In general, Rajan frequently receives pressure from the government as Modi seeks to nudge the growth rate higher. However, Rajan has always urged the government to rather work on political and economic reforms which means revising land acquisition law, tax system and restoring fiscal health where Modi government has shown a steady pace.
5. Accessible
How many times have you seen an RBI governor addressing school kids? Well, Raghuram Rajan frequently holds discussions with people to help them understand the economy better. In one recent conference, a boy named Rajas from Sister Nivedita School, Dombivali East, Mumbai asked him “the mere rumour of the US cutting down on the federal stimulus saw the rupee crashing in value. When will we see an Indian policy affecting other countries so intensively?”
To which, he smiled and responded,"By the time Rajas would grow up, the rupee will be very strong by then and the RBI governor will have to make policies keeping the world economy in mind." He also added that the Indian economy would be among the top two or three economies in the world by the time Rajas grew up.