Raghuram Rajan Raghuram Govinda Rajan is the current and
the 23rd Governor of the Reserve Bank of India, having taken charge of India's central banking
institution on 4 September 2013, and succeeding Duvvuri Subbarao.
Rajan was chief economic adviser to India's Ministry of Finance during the previous year
and chief economist at the International Monetary Fund from 2003 to 2007.
He is on leave of absence as a professor of finance at the graduate business school at
the University of Chicago.
Early life Raghuram G.Rajan was born in 1963 in Bhopal,
Madhya Pradesh in a Tamil family and his father was a Senior Bureaucrat in Indian Government.
He did his schooling from 7th to 12th standard in Delhi Public School, RK Puram and graduated
from the Indian Institute of Technology, Delhi with a bachelor's degree in electrical engineering
in 1985, after which he acquired a Post Graduate Diploma in Business Administration from the
Indian Institute of Management Ahmedabad in 1987.
He received a PhD in Management from the MIT in 1991 for his thesis titled "Essays on Banking".
Career After graduation, Rajan joined the Booth School
of Business at the University of Chicago.
He was the Chief Economist at the International Monetary Fund (IMF) from October 2003 to December
2006.
In November 2008, Indian Prime Minister Dr. Manmohan Singh appointed Rajan as an honorary
economic adviser.
That same year, a high-level committee on financial reforms, headed by Rajan, submitted
its final report to the Planning Commission.
Replacing Kaushik Basu, Rajan was appointed as Chief Economic Adviser to the Government
of India on 10 August 2012.
He also prepared the Economic Survey for India for the year 2012-13, on 27 February.
On August 6, 2013 it was announced that Rajan would take over as the next RBI Governor.
He was appointed RBI Governor for a term of 3 years succeeding D Subbarao whose term ended
on 4 September 2013.
Economic and political views In 2005, at a celebration honoring Alan Greenspan,
who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial
paper that was critical of the financial sector.
In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that
disaster might loom."
Rajan argued that financial sector managers were encouraged to "take risks that generate
severe adverse consequences with small probability but, in return, offer generous compensation
the rest of the time.
These risks are known as tail risks.
But perhaps the most important concern is whether banks will be able to provide liquidity
to financial markets so that if the tail risk does materialize, financial positions can
be unwound and losses allocated so that the consequences to the real economy are minimized."
The response to Rajan's paper at the time was negative.
For example, former U.S. Treasury Secretary and former Harvard President Lawrence Summers
called the warnings “misguided” and Rajan himself a "luddite".
However, following the 2008 economic crisis, Rajan's views came to be seen as prescient;
by January 2009, The Wall Street Journal proclaimed that now, "few are dismissing his ideas."
In fact, Rajan was extensively interviewed on the global crisis for the Academy Award
winning documentary film Inside Job.
Rajan wrote in May 2012 that the causes of the ongoing economic crisis in the U.S. and
Europe in the 2008–2012 period were substantially due to workforce competitiveness issues in
the globalization era, which politicians attempted to "paper-over" with easy credit.
He proposed supply-side solutions of a long-term structural or national competitiveness nature:
"The industrial countries should treat the crisis as a wake-up call and move to fix all
that has been papered over in the last few decades...
Rather than attempting to return to their artificially inflated GDP numbers from before
the crisis, governments need to address the underlying flaws in their economies.
In the United States, that means educating or retraining the workers who are falling
behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial
sector to do good while preventing it from going off track.
In southern Europe, by contrast, it means removing the regulations that protect firms
and workers from competition and shrinking the government's presence in a number of areas,
in the process eliminating unnecessary, unproductive jobs."
During May 2012, Rajan and Paul Krugman expressed alternate views on how to reinvigorate the
economies in the U.S. and Europe, with Krugman mentioning Rajan by name in an opinion editorial.
In an article in Foreign Affairs magazine, Rajan had advocated structural or supply-side
reforms to improve competitiveness of the workforce to better adapt to globalization,
while also supporting fiscal austerity measures (e.g., raising taxes and cutting spending).
Rajan conceded that austerity could slow economies in the short-run and cause significant "pain"
for certain constituencies.
Krugman rejected this view, advocating instead traditional Keynesian fiscal stimulus (e.g.,
spending and investment) and monetary stimulus, arguing the primary factor slowing the developed
economies was a general shortfall in demand across all sectors of the economy, not structural
or supply-side factors that affected particular sectors.
This debate occurred against the backdrop of a significant "austerity vs. stimulus"
debate occurring at the time, with some economists arguing one side or the other or a combination
of both strategies.
Awards In 2003, he won the Fischer Black Prize awarded
by the American Finance Association for contributions to the theory and practice of finance by an
economist under age 40.
He was awarded the fifth Deutsche Bank Prize for Financial Economics 2013 on 26 September
2013 for his "ground-breaking research work which influenced financial and macro-economic
policies around the world".
Few awards received by him in his illustrious career as an academician and a researcher
in financial economics are as follows - Personal life
Raghuram is married to Radhika Puri, a classmate from IIM Ahmedabad.
They have a son and a daughter.
Publications Saving Capitalism from the Capitalists, was
co-authored with fellow Chicago Booth professor Luigi Zingales and published in 2004.
Fault Lines: How Hidden Fractures Still Threaten the World Economy, published in 2010, has
won the Financial Times and Goldman Sachs Business Book of the Year Award for 2010.
He has also published numerous articles in top-tier finance and economics journals including
the American Economic Review, Journal of Economic Perspectives, Journal of Political Economy,
Journal of Financial Economics, Journal of Finance and Oxford Review of Economic Policy.
The True Lessons of the Recession; The West Can’t Borrow and Spend Its Way to Recovery
by Rajan in May/June 2012 Foreign Affairs Several of Dr. Rajan's opinion editorials
are available at: Rajan-Project Syndicate Opinion Editorials