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Raghuram Rajan assures India’s economic reforms are in right direction

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Davos: Referring to some of the obsolete regulations that are currently in place, RBI Governor Raghuram Rajan said, “Economic reforms in India are going in the right direction but the level is wrong.”

In a television interview, Rajan said, “Well let me put it this way, the direction is the right one but the level is wrong. We have too much of the wrong kind of regulation.”

“So we do need to hack away at this, and it will take time, it doesn’t happen overnight. We are doing it and do recognise that we overregulated. That business needs a better environment,” he observed.

“At the same time, there is a whole set of new business coming in that we have to find ways to deal with an example, online lending. How do we do with what happens in a downturn?” Rajan said.

He was responding to a question on economic reforms in the country.

Rajan bitterly regretted that people tend to talk only about big ticket items, but not the other reforms that are currently being undertaken.

“Well, I think one tends to focus on the big iconic items like in India there’s now a goods and service tax which is likely to unify the country. That’s stuck so far in some Parliamentary discussion between the opposition and government. Hopefully, it will be done sooner rather than later. But really there’s a lot going on the ground which is less obvious, “he said.

“For example, last week the Prime Minister inaugurated a programme called ‘Start Up India’ which is about really eliminating the bureaucratic hurdles of starting a new business. New business had to register with 10, 15, 20 different authorities including the pension fund,” Rajan said.

“You have one employee why do you need a pension fund at this point? So the idea here is to make it simpler to start, but also remove the inspections. For three years no inspectors would show up. You self-certify what you did,” he said, adding that these kinds of reforms are really building on each other.

“And there’s a very vibrant private sector in India also which is taking off. Internet market places, fantastic new development because what India doesn’t have is cheap land. You can’t build retail stores everywhere.

“But if you build a virtual warehouse with warehouses performing the role of you now, storing goods. You can connect small town households to the big market. And you can connect small town manufactures again to the big market,” he said.

Responding to another question, Rajan said he is not worried about Chinese economic slowdown.

“In terms of the quantity of growth, there’s still a lot of growth coming from China in terms of dollars. Of course, percentages are falling all the time. That is natural to be expected of an economy which is growing richer and therefore which is going to slow,” he said.

“So I’m not excessively worried about Chinese growth,” Rajan said.(Inputs from agencies)

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Raghuram Rajan: The Man Who Revolutionized The Indian Banking System

During his academic days, he won the Director's Gold Medal in IIT Delhi and was a Gold medalist at IIM Ahmedabad.

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Raghuram Rajan was born on 3 February 1963, in Bhopal, Madhya Pradesh. Wikimedia Commons
Raghuram Rajan was born on 3 February 1963, in Bhopal, Madhya Pradesh. Wikimedia Commons
  • On September 5, 2013, Rajan took charge of Governor of India’s central banking institution
  • Raghuram Rajan graduated in electrical engineering from IIT Delhi
  • Under Raghuram Rajan, the RBI licensed two universal banks and approved eleven payments banks

Raghuram Rajan is one of the technically financial people to grace the Indian economy and banking sector. He came at the time when the Indian economy was in the worst crisis ever faced in last decades. Through his meticulous planning, he banked on reforming and stabilizing the financial situation in the nation. On September 5, 2013, Rajan took charge of Governor of India’s central banking institution, succeeding Duvvuri Subbarao.

Raghuram Rajan was born on 3 February 1963, in Bhopal, Madhya Pradesh in a Tamil family. His father was a senior officer in the Intelligence Bureau department. He is married to Radhika, a classmate from IIM and has two children.

Also Read: Was ‘The First Women President Of India’ A Well Deserved One?

Raghuram Rajan graduated in electrical engineering from IIT Delhi and then he joined Tata Administrative Services as a management trainee. However, he soon left this to pursue a doctoral program in management at the MIT Sloan School of Management. After that, he acquired a Post Graduate Diploma in Business Administration from IIM, Ahmedabad in 1987 and later Raghuram Rajan did his PhD from the Massachusetts Institute of Technology.

Raghuram Rajan was appointed as the Vice-Chairman of Bank for International Settlements (BIS) on 9th November 2015.  Wikimedia Commons
Raghuram Rajan was appointed as the Vice-Chairman of Bank for International Settlements (BIS) on 9th November 2015. Wikimedia Commons

During his academic days, he won the Director’s Gold Medal in IIT Delhi and was a Gold medalist at IIM Ahmedabad. Even after being so bright, he admitted of having poor command over the Hindi language.

Take a look at some of the aspects related to the life of one of the genius economist of India: 

  1. After Raghuram Rajan joined as the Governor of the RBI, the rupee rose 2.1 percent against the US dollar. Before that, the rupee had weakened sharply against the dollar, hitting almost Rs 69 to a single dollar.
  2. To bring down the inflation, the RBI under Rajan adopted the Consumer Price Index (CPI) despite the Central Government’s disapproval. Consequently, the CPI dropped from 9.52 percent in August 2013 to 5.24percent in April 2016, accompanied by the required drop in global commodity prices.
  3. Under Raghuram Rajan, the RBI licensed two universal banks and approved eleven payments banks. It was done to extend the country’s banking services to the two-thirds of the population, who were until then still deprived of basic banking facilities.
  4. Raghuram Rajan has the privilege to be appointed as the youngest-ever Economic Counselor and Director of Research (chief economist) at the International Monetary Fund (IMF) from October 2003 to December 2006.
  5. During his stay at IIT Delhi, Raghuram Rajan was the head of the student’s council.
  6. Raghuram Rajan was ranked by his fellow mates as the economist with ‘the most important ideas for a post-crisis world’ in a 2011 poll in The Economist.
  7. Raghuram Rajan has the distinction of being featured on Foreign Policy magazine’s Top 100 Global Thinkers list in 2010 and 2012.
  8. Raghuram Rajan has also served as a professor in the University of Chicago’s Booth School of Business in the economics faculty. Before leaving the position due to public service commitments, he was awarded the accolade in 2007 which he held till 2013.
  9. Raghuram Rajan was appointed as the Vice-Chairman of Bank for International Settlements (BIS) on 9th November 2015. The bank was established as an international company by shares of the central banks of different countries. The bank provides banking facilities to the central bank and is also regarded as the key bank of the central banks.
  10. Raghuram Rajan authored a very popular book, ‘Fault Lines: How Hidden Fractures Still Threaten the World Economy,’ was awarded the Best Business Book of the Year in 2010 by Financial Times-Goldman Sachs. This book argued that serious flaws in the economy are to blame for the current economic crisis.

    After Raghuram Rajan joined as the Governor of the RBI, the rupee rose 2.1 percent against the US dollar. Wikimedia Commons
    After Raghuram Rajan joined as the Governor of the RBI, the rupee rose 2.1 percent against the US dollar. Wikimedia Commons
  11. Raghuram Rajan was awarded the inaugural Fischer Black Prize by the American Finance Association in January 2003. The award is given to the financial economist under the age of 40 who has made the significant contribution to the sector and is given in every two years.
  12. In 2005, Raghuram Rajan presented a theory outlining the looming financial dangers and risks associated with the current system and he got a very negative response for it. But when an actual global economic crisis occurred in 2008, his analytical skills came true.
  13. During Raghuram Rajan’s term as the RBI(Reserve Bank of India) governor, the RBI sold the longest ever government bonds with a 40-year maturity.
  14. In September 2003, Raghuram Rajan became the youngest ever to be appointed as the Economic Counselor and Director of Research (Chief Economist) of the International Monetary Fund.
  15. Raghuram Rajan has served at the University of Chicago’s Booth School of Business as the Eric J. Gleacher Distinguished Service Professor.