India is looking for a new RBI governor. Twitter, Facebook, and news media are flooded with the Raghuram Rajan and the Kismet of RBI stories. The Rupee got weakened and the share market is fluctuating. This is the current scenario in the country and the end of Rajan’s story as an RBI Governor.
Raghuram Rajan’s story started when he joined RBI as a governor in 2013 and became the 23rd governor of the RBI. It was the time when the condition of the Indian economy was not good. The currency was dropping its value, Inflation was at 10 percent and the Sensex was in bad shape.
On September 04, 2013, when Raghuram Rajan gave his first speech as a central bank governor, the Sensex rose by 1.83 percent and on the next morning, the rupee gained strength by 2.1 percent against the dollar. Raghuram Rajan eased the norms for foreign borrowings. Under his governance, the RBI detained WPI (Wholesale Price Index) and accepted CPI (Customer Price Index) as a new key indicator for monitoring inflation.
The time when the economy of India was expecting a miracle, Rajan joined and reformed the banking sector and economy. He strengthened the value of the rupee, brought the inflation rate to 5.4 percent from 10 percent and the Forex Reserve rose by 30 percent and came to 380 billion dollars. He reformed and expanded the banking sector of the country by giving license to 11 new payment banks and 2 universal banks. Now, the GDP growth rate is 7.9 percent and the size of the Indian economy is 2.4 trillion dollars by nominal GDP. He as the head of RBI contributed in rank 4 of India by PPP GDP.
In Raghuram Rajan’s term, here are the glimpses of current parameters. The repo rate of India is 6.5 percent and the reverse repo rate is 6 percent as Rajan slashed repo rate at the lowest ever point in the last 3 years. The cash reserve ratio is 4 percent and SLR is at 21.25 percent. The RBI was planning to erase the problem of bad loans in India under his leadership.
Did you ever notice which Central Bank Governor was so popular? Raghuram Rajan and the Kismet of RBI impressed the world economists and the country people with his work. He got recognition for his reforms in media. He was awarded as the Best Central Banker by Euromoney Magazine. Economic Times named him James Bond by publishing the headline “the man who predicted the world’s future sets out to correct India’s present”. After some time, Rajan got another name “The Governator” on Twitter.
On June 18, 2016, it was an unexpected move when Raghuram Rajan announced his exit when his term will end on Sept 03, 2016, after getting criticized for high-interest rate and not being mentally Indian by Subramanian Swamy, the BJP parliamentarian. He wrote a letter to his staff and mentioned his achievements during this 3 years period. Rajan confirmed his exit with these words. “While I was open to seeing these developments through, on due reflection and after consultation with the government, and I will be returning to academia when my term as governor ends on September 4, 2016,” He said. “I will, of course, always be available to serve my country when needed.”
After the exit of India’s so-called “Rockstar Economist”, what will be the kismet of RBI. RBI is considering some names to fill the shoes of Raghuram Rajan. The most expected future RBI Governor is to be Arvind Subramanian who is the chief economic adviser at India’s finance ministry.
This is Raghuram Rajan and the kismet of RBI’s story so far. Winning hearts is harder than winning wars and Rajan has done that. It is his actions that have made the whole country heartwarming on his exit. So, all the best to RBI as it will be tough to get through this change.
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