It is not every day that we write about the governor of the Reserve Bank of India (RBI) in these pages. But, Raghuram Rajan is more than your average boring central banker. And, you know the reason. It seems hard to keep him away from the headlines these days. Like when he said this in his speech at the Institute of Rural Management Anand last month: “Perhaps the reason we have been so willing to protect the borrower against the creditor is that the hated moneylender looms large in our collective psyche. But, the large borrower today is not a helpless illiterate peasant and the lender today is typically not the sahukar but the public sector bank — in other words, we are the lender. When the large promoter defaults wilfully or does not cooperate in repayment to the public sector bank, he robs each one of us taxpayers, even while making it costlier to fund the new investment our economy needs. We need a change in mindset in which the wilful or non-cooperative defaulter is not lionised as a captain of industry, but justly chastised as a freeloader on the hardworking people of this country.” When was the last time you heard a banker put across the thoughts of millions of Indians so bluntly in public?
That Rajan is single-minded in putting the Indian economy back on the rails is quite clear from how he has steadfastly refused to cut interest rates despite entreaties from all quarters, including the finance minister himself. While critics have argued that lowering interest rates is the only way to stimulate growth, the governor has been steadfast in his belief that “this notion somehow that the RBI is standing in the way of growth is complete nonsense. Today, what is standing in the way of growth is inflation. Unless we bring inflation down, growth with lower interest rates has no hope”.
Rajan, of course, was prepared for the brickbats when he took over as the RBI governor in September last year. Though he was greeted by the media calling him “Dr Feelgood” and a rally by the stock market on his first day in office, he was well aware of the consequences of the bitter pill he was planning to administer to the economy. As he said in his inaugural statement: “The governorship of the central bank is not meant to win one votes or Facebook ‘likes’. But, I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism. Rudyard Kipling put it better when he mused about the requirements of an ideal central banker in his poem ‘If’: If you can trust yourself when all men doubt you, But make allowance for their doubting too.”
His straight forward talk was not restricted to domestic issues. Early this year, in the run up to a meeting of the finance ministers and central bank governors of the world’s richest economies, Rajan was equally blunt on the dangers the world economy faced and who was responsible: “International monetary cooperation has broken down. Industrial countries have to play a part in restoring that and they can’t, at this point, wash their hands off and say we’ll do what we need to, you do the adjustment.” It was not a popular statement. George Osborne, the British finance minister, was quoted as saying that both developing and developed countries need to get their houses in order. Jacob Lew, the US Treasury secretary, said, “Emerging markets need to take steps of their own to have their fiscal house in order.” And, the German finance minister, Wolfgang Schauble, said, “Everyone must, first of all, do their own homework, and then countries can demand solidarity from others.”
That international finance bigwigs chose to respond to Rajan spoke as much about India’s growing clout in the world monetary system as about the grudging respect for Rajan’s credentials as one of the world’s most respected economists. He had, after all, in 2005, famously warned of the impending financial catastrophe in the much publicised paper ‘Has Financial Development Made the World Riskier?’. He also, in a way, predicted the coming crisis in the Indian economy, first saying in 2010 that “India has taken enormous strides in the last 25 years. Many Indians believe prosperity is just a matter of time. But, if there is one thing that the study of economic growth tells us, it is that growth can never be taken for granted. Too many countries have grown strongly for decades, only to stagnate”. And, later, “Self-delusion is the first step towards disaster, for businesses as much as for countries.”
So, was it surprising, then, that this good-looking, 51-year-old IIT-IIM-MIT-educated professor of economics at Chicago University, got even the normally unflappable Shobhaa De hot all over? In her now classic piece ‘Economy With Raghuram Rajan Will Be Sizzling Hot’ in The Economic Times on the day he took over as the RBI governor, she sounded like an out-of-control teenager writing about a mad crush. She called him sexy at least five times in the piece, besides using other terms of endearment, such as ‘dishy’ , ‘much panted-after’, ‘hunk’, ‘guy who’s got the groove’, ‘eye candy on the pink pages’ and ‘Ranbir Kapoor of banking’. She also spoke about how ‘banking’ was close to ‘bonking’, and rounded off with a warning: “We’ll be watching you — every move you make, every step you take. Make sure you don’t drop that towel, like Ranbir Kapoor did in Sawaariya. On the other hand…..aahhhhh…. wishful thinking!”