Rupee firmly in saddle, rainmaker Raghuram Rajan leaves

Raghuram Rajan is a man for rough weather. He can forecast storm clouds and warn about the potholes with equal elan. He can galvanise young minds to fight for their rights and prod governments into positive action.

From Jackson Hole to Mint Street, Rajan has played this watchdog role to perfection. In the fall of 2005 when he blew the warning bugle of an impending financial crisis before an audience that had gathered to felicitate Alan Greenspan tenure, Rajan was an academician who had left the University of Chicago to work with the International Monetary Fund as its first non-western and youngest chief economic advisor.

In September 2013, he took over as RBI governor at a time when the rupee was nosediving daily to hit at new low at 68.80 in August 2013, inflation was high at 9.8% in September 2013 and growth was weak. At the RBI, his role has been no different. He has been a slayer of inflation and warned against a monetary policy going all out for unbridled growth without building in safeguards. Rajan's speech at Jackson Hole in Wyoming, where the global central bankers gather for brainstorming, in 2005 set a contrarian tone. This was a time when the US investor community was basking under a spell of high growth. His warning that the global financial system had become a riskier place and that incentive schemes in banks were flawed fell on deaf ears. In an era dictated by risk-takers, nobody heard Rajan seriously until the financial crisis blew up in their faces in 2008.

Back home and in a more active role of controlling monetary policies for banks, Rajan continued to warn policymakers and strategists on economic development models. When Prime Minister Narendra Modi launched the 'Make in India' programme, Rajan was the first to speak up to say we should 'Make For India', and warned that an export-led growth model was flawed.

"If the external demand growth is likely to be muted, we have to produce for the internal market. This means we have to work on creating the strongest sustainable unified market we can, which requires a reduction in the transaction cost of buying and selling throughout the country," he said.

Rajan, recruited as the RBI boss by the earlier Congress-led government, could be mistaken as playing the opposition to Modi. In reality, however, he was fine-tuning the Prime Minister's programme.

Whether it was in Jackson Hole when he stood up to Alan Greenspan or back home at Mint Street, Rajan was not trying to topple the applecart. Rather, he was putting the horse in front of the cart.

Rajan will also be remembered for the speeches he made, which sometimes crossed the boundary walls of his official role. Critics pointed out that he went beyond his mandate to speak on topics outside monetary policy.

Rebutting this, Rajan said: "The governor is also a role model for the youth in this country, and should therefore not duck the responsibility to urge them to follow the highest standards of citizenship when he or she is invited to speak directly to them." Probably that is why when he delivered a speech at IIT Delhi in October last year he invoked the students to the spirit of tolerance. He told the students, "As you go out in the world, remember our tradition of debate in an environment of respect and tolerance. It is far better to improve the environment for ideas through tolerance and mutual respect. By upholding it, by fighting for it, you will be repaying your teachers in this great institution, and your parents who worked so hard to send you here. And you will be doing our country a great patriotic service."

His last public speech at Delhi's St Stephens college, the institute where he wanted to study Bbachelor of Economics but landed up in IIT, was no less significant. He said that the RBI's ability to say 'no' to the government should be 'protected'. For him, the role of the RBI Governor is sacred. "There is a reason why central bank governors sit at the table along with the finance Ministers in G-20 meetings. It is that the central bank governor, unlike other regulators or government secretaries, has command over significant policy levers and has to occasionally disagree with the most powerful people in the country," he said.

It is this disagreement with the Narendra Modi-led BJP government that has abruptly ended his mission. As he hangs up his boots to return to academia, he will feel that he couldn't conclude what he had set out to accomplish. Cleaning up balance-sheets of banks, creating systems to punish erring borrowers and reducing exposure of banks to big corporates are some of the corrective measures that he had kick-started. As he says. it's all work in progress for his successor Urijit Patel to take forward.

The hawk-eyed approach of Rajan would be missed as we step into a new era where the RBI governor has to take decisions in tandem with a committee that has representation from the government.

Ceasing to be RBI governor does not necessarily mean that Rajan will disappear from the minds of Indians. He can play a new role by working on assignments that relate to India and make inspiring speeches to the young minds of the country that make them aware of their meaningful destinies. Rajan's last day in office was on Sunday. He will hand over the reins to Urjit Patel on Monday.

manju.ab@dnaindia.net