In March 2015, Christine Lagarde, the head of the International Monetary Fund referred to a 2005 speech by Raghuram Rajan where he predicted a global financial crisis, and said that the world should have listened to Rajan then.
In 2013, when Raghuram Rajan took over as the Governor of the Reserve Bank of India, the markets were in turmoil. The Rupee had fallen by 15 percent. The Nifty by 13 percent. The day after he joined, the Nifty went up by three percent. He worked with banks and within the RBI itself to ease restrictions and free up the economy. All of it worked. Now, as Raghuram Rajan ends his term in a few months, India is in a great position as far as the economy goes, when half the countries around the world are facing economic problems.
Rajan is leaving the economy in good shape but stated that he intended on staying for a second term, as had many of his predecessors. But the verbal attacks by Subramaniam Swamy and other members of the BJP government were too much to handle. The RBI needs to function as a separate entity. In losing Rajan, we have lost someone who could have taken the economy further. Perhaps his successor will, but we don’t know that for sure. What we do know is that any Indian academic will now think twice about taking up a public policy position in India now.
