When Raghuram Govind Rajan came to India as the government\u2019s chief economic adviser two years ago, everyone warned him about the bureaucracy. \u201cPeople told me the bureaucracy here will be very difficult to deal with\u2014very smart people but with very different agendas.\u201d<\/p>\n
Rajan, 51, hasn\u2019t found much truth in that. \u201cIf you have paid attention elsewhere and if you are not completely na\u00efve, there isn\u2019t a whole lot that is surprising or different. It is slightly different here inasmuch as there isn\u2019t often a sense of urgency. Things that need to be done yesterday are still not done, in some cases. But that\u2019s not surprising.\u201d<\/p>\n
When he took over as the Reserve Bank of India (RBI) governor on 4 September, he was handed a report by a committee he had headed in 2008 which recommended differentiated bank licences (where different kinds of banks do different things as opposed to the current crop of universal banks). Predecessor Duvvuri Subbarao had liberalized (branch licensing) right up till tier 2 cities but had then hit a roadblock. \u201cSo my initial effort was to pull all those things that were in the planning stage and say let\u2019s finish. There\u2019s no reason for things to season.\u201d<\/p>\n
Rajan even has a term for this style of policymaking. \u201cOne way to do things is to say let us think in theory, develop the best plan possible and then implement in one go. I call this the Brahminical way. But this may not work as at the implementation stage you will realize that some aspects were not considered. The alternative is, roll up the sleeves, don\u2019t minimize the thinking phase, but do it quickly. I am trying to do that. There\u2019s this Chinese phrase, \u2018Cross the river by feeling the stones\u2019. It\u2019s basically step-by-step, but take that step, don\u2019t theorize about how you\u2019re going to cross the entire river, not knowing where the steps are… Take the first step and feel your way through the next step, be more practical about it.\u201d<\/p>\n
Extended honeymoon<\/strong> Rajan walks in a few minutes past 1pm. A warm handshake later, I ask him bluntly whether he offered to resign when the Bharatiya Janata Party-led National Democratic Alliance government took over in May. After all, he was appointed by the Congress-led United Progressive Alliance (UPA) government. Rajan doesn\u2019t seem annoyed but prefers not to answer this question, even off the record. \u201cOf course, if I lost the confidence of the government at any point, I would go the next day,\u201d he says curtly.<\/p>\n Was the governorship part of the arrangement when he took over as chief economic adviser? I ask him even before we sit down to lunch.<\/p>\n \u201cThere was no arrangement,\u201d says Rajan.<\/p>\n We plough through all the food with the portraits of 16 of RBI\u2019s 22 past governors (Subbarao is still not there though it has been a year since he stepped down) looking down at us.<\/p>\n Rajan had two conditions when I invited him for lunch: One, let\u2019s meet at the RBI and two, no personal questions. He is a vegetarian, although he doesn\u2019t mind eating eggs. So, the onus of eating all that meat and seafood is on me, but I find him keeping a close eye on my plate. \u201cAre there too many bones? Would you care for a fresh plate?\u201d he asks me while eating a chapati with Paneer Birbali.<\/p>\n In August last year, the UPA government announced the name of the next RBI governor a month before the position fell vacant and Rajan, then chief economic adviser, was sent to the RBI as an officer on special duty\u2014something that had never happened in the RBI\u2019s 79-year history.<\/p>\n It was a tough gig. Inflation had been high for years but what added to the problem was a record high current account deficit, a falling local currency against the greenback and the real threat of a ratings downgrade.<\/p>\n One year on, the rupee has stabilized, the current account deficit is manageable, Rajan is not shy of raising policy rates to fight inflation and, most importantly, the government is backing him to the hilt in his fight against inflation. He is under no pressure to cut interest rates to boost growth in Asia\u2019s third largest economy.<\/p>\n Unbelievably, Rajan\u2019s honeymoon with industry and people in general continues. What\u2019s the secret? \u201cLook at the Indian cricket team. They are gods, they can\u2019t do any wrong, and then they come down to earth after they lose a few matches. I am waiting for something to happen to bring me down there, even though I can\u2019t say I am looking forward to that. I see my job as a kind of a mission. I have to keep doing what I do. And take the decision without looking to who\u2019s happy and who\u2019s not,\u201d he says.<\/p>\n Born in Bhopal in 1963, the third child of a police officer, Rajan\u2019s rise in the world of economics has been meteoric. A gold medallist at both the Indian Institute of Technology, Delhi, and the Indian Institute of Management, Ahmedabad, he did a short stint at Tata Administrative Services as a management trainee before getting a doctorate in management from the Massachusetts Institute of Technology\u2019s Sloan School of Management in the US.<\/p>\n In 1991, he joined the University of Chicago Booth School of Business as an assistant professor of finance and worked there till August 2003, when he was appointed chief economist at the International Monetary Fund (IMF).<\/p>\n In 2005, at Jackson Hole, Wyoming, at the annual central bankers\u2019 conference, Rajan tore apart US Federal Reserve board chairman Alan Greenspan\u2019s work and reputation. A 2009 Wall Street Journal report on his presentation says Rajan even argued that the banking system itself would be at risk and banks would lose confidence in one another. \u201cThe inter-bank market could freeze up, and one could well have a full-blown financial crisis.\u201d Two years later, that\u2019s exactly what happened.<\/p>\n Rajan still believes that financial reforms take \u201cA Hundred Small Steps\u201d, the title of a 2008 paper by a committee that he headed, where he spoke about inflation targeting and a floating exchange rate among other things. \u201cWhatever you put in place, the success of that you will see in years down the line, especially in the financial sector, where things have to catch on…. There is a sense in India that we are uniquely different from the rest of the world. In some ways we are, but in many ways some of the issues we find here are similar to the issues you find anywhere else.\u201d<\/p>\n Rajan plays squash or runs daily. In January, he participated in the Mumbai Half Marathon. When it comes to work though, he\u2019s been more of a sprinter than a marathon man from the beginning. \u201cWe have stabilized the currency. We need to bring inflation under control and bring NPAs (non-performing assets) down\u2014those two things are still ongoing. They will take time to fully get tackled. But at least we made a quick beginning. Going forward, it was also to show that we could put down the agenda for revitalizing the financial sector\u2014banking, markets, inclusion. We are taking steps and we have to see how they play out. For example, the interest rate futures market in India is picking up in liquidity, but still at about Rs.1,500 crore a day, it\u2019s relatively small. This has to grow. We need to have more players coming in. Let\u2019s move and let\u2019s keep fiddling (with) the structure to get it right,\u201d he says.<\/p>\n Of course it\u2019s not easy to work fast in an organization like the RBI. The central bank has been known to sit on things but rarely says no. \u201cThis is an organization with tremendous capabilities but it is also a bureaucracy, in the non-pejorative sense of the word. Sometimes the bureaucracy delays things in order to essentially say no without saying so. Especially in a country, where sometimes saying no is seen as a slap in the face, it\u2019s better that the issue slowly dissipates over time rather than having to take a decision. Some policies that seem inordinately delayed should be seen in that light\u2014perhaps there\u2019s a fundamental disagreement over the policy, and therefore the best way to kill it without prompting a confrontation\u2026,\u201d he says.<\/p>\n Rajan agrees that people are always trying to see how far they can push the central bank to see their point of view. \u201cOf course, there\u2019s immense pressure on the RBI from different quarters\u2014I can certainly attest to that\u2014to relax on every front of our regulations and supervision. People asking you to relax on those fronts sometimes are trying to see how far they can push you. Of course, if the system gets into trouble, the RBI will bear the blame because it\u2019s the stability regulator, but before that everybody will push you to be \u2018flexible\u2019. There will be pressure, but the appropriate response RBI may have found is dignified silence.\u201d<\/p>\n Restructuring RBI<\/strong> The RBI board has already approved Rajan\u2019s ambitious plan. He refutes the idea that he plans to import talent from outside. \u201cIn an organization that has grown as it has, it\u2019s better to grow the internal talent than bring too many people from outside as they will be seen as competing for the existing jobs. You can bring people in if you are expanding, but you have to be very careful in doing it and do it in small doses only.\u201d<\/p>\n Rajan declines the fresh fruits and ice cream and opts for coffee instead. It seems like the right time to ask him about commentators who have described him as India\u2019s newest sex symbol (in Shobhaa De\u2019s words, \u201cThe guy\u2019s put \u2018sex\u2019 back into the limp Sensex\u201d). Many of my female colleagues at Mint swoon over him and even those who don\u2019t know the way to the RBI headquarters on Mint Road are keen to attend his press conferences.<\/p>\n Rajan, 6ft, 1 inch, blushes but soon recovers to say: \u201cMy wife Radhika teases me a lot about this. I worry that there is a real danger that you distract from the very important and sober task of policymaking. But that said, the value of having glamour introduced into some professions is that it attracts young people into that profession. If a boring economist can become glamorous, maybe economics is something worth pursuing.<\/p>\n \u201cWhen I was young, I read about (John Maynard) Keynes. And I said what a glamorous guy, doing great policies, writing great books; wouldn\u2019t that be a good thing to do? And what did he do? Economics. We look at people who catch our eye, and then we learn more about what they do and that helps attract us to the field. I think we need more economists, so in that sense I am not upset.\u201d<\/p>\n It\u2019s well past 2.15pm and I see him looking furtively at his watch. I ask him what he does when he is not writing monetary policy and not thinking about financial stability. \u201cSquash in the evening or in the morning, depending on the day and depending on if I haven\u2019t torn any muscles. Now my son is home (he is studying in the US), we play video games together. I talk to my daughter (who is also studying in the US); occasionally go out with my wife to visit friends. I love reading, and sometimes I write. I do write all my speeches. I like to run, if I can find the weather cooperating, I like to visit places, if we can go out to a new place for a board meeting, I try to look around. Eating out is a little difficult these days simply because people recognize\u2026 They don\u2019t interrupt you but still I feel a little embarrassed, my son feels even more embarrassed.\u201d<\/p>\n The liveried RBI waiter appears with a tray of paan, formally signalling the end of our meeting. I pick up two and without losing a moment shoot my last question to Rajan: He has achieved so much in such a short time. Even if he remains RBI governor for five years, he will be 55. What will he do after that?<\/p>\n \u201cI like writing and thinking. What next is back to the future, go back to writing and thinking, with the idea that I have learnt a lot about India and will write more about it\u2014what I think is going right and wrong. Not a \u2018tell-all\u2019 book but a thought-piece like my other books. But I have no fears about a life of quiet contemplation. Actually that\u2019s my other side. I think my wife is perfectly happy staying quiet and going underground. And we have no desire to be in the limelight.\u201d<\/p>\n He may not like this but I am sure limelight will always chase him.<\/p>\n","protected":false},"excerpt":{"rendered":" When Raghuram Govind Rajan came to India as the government\u2019s chief economic adviser two years ago, everyone warned him about the bureaucracy. \u201cPeople told me…<\/p>\n","protected":false},"author":1,"featured_media":1681,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-913","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"acf":[],"_links":{"self":[{"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/posts\/913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/comments?post=913"}],"version-history":[{"count":1,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/posts\/913\/revisions"}],"predecessor-version":[{"id":915,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/posts\/913\/revisions\/915"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/media\/1681"}],"wp:attachment":[{"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/media?parent=913"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/categories?post=913"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bankerstrust.in\/column\/wp-json\/wp\/v2\/tags?post=913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nWe\u2019re having lunch in the RBI visitors\u2019 room, adjacent to Rajan\u2019s 18th-floor corner office in Mumbai\u2019s Fort area. The menu features everything you could possibly think of, from green pea soup and stuffed pomfret to prawn balchao and badami murg\u2014all from the RBI kitchen run by chef Brian Pais.<\/p>\n
\nMeanwhile, work is on to modernize the behemoth. After all, it was set up in the 1930s, at a time when the world was reeling under the Great Depression, and since then its objectives have remained unchanged. \u201cWe are undertaking some internal reorganization of RBI\u2019s structure and how it functions. There will be concerns, like any other reorganization, and we have to take the staff along with us. But the whole idea is to make it an organization which is fully capable of meeting the challenges of the 21st century. We need to figure out how to move towards specialization. Training and support is a second issue. We need good performance evaluation and once we evaluate weaknesses, we need to offer support in terms of skill building,\u201d says Rajan.<\/p>\n