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Will Time permit this talented economist to make an impression?
Siddharth Zarabi in New Delhi | November 07, 2008
It may just be sheer coincidence or plain design that Prime Minister Manmohan Singh chose to appoint Raghuram Rajan as his honorary economic adviser earlier this week, less than two weeks before India is scheduled to participate in a meeting of the G-20 to discuss the global financial crisis and what needs to be done to deal with it.
The question everybody seems to ask is: Will Bhopal-born Rajan, 45, have a role to play in assisting the Indian government in articulating its stance at the global meet? Moreover, general elections in the country are due in a few months. Why has Prime Minister Singh brought on board Rajan at this moment?
These are mysteries which will be unravelled in due course. What is certain is that this is yet another feather in the economist's cap.
After studying electrical engineering at the Indian Institute of Technology-Delhi and business administration at the Indian Institute of Management-Ahmedabad, Rajan did his PhD from the Massachusetts Institute of Technology. In September 2003, when he was 40, Rajan became the economic counsellor and director of research (chief economist) of the International Monetary Fund -- the youngest ever to be appointed to this post. In early 2007, Rajan returned to the Graduate School of Business at the University of Chicago where he is the Eric J Gleacher Distinguished Service Professor of Finance.
In 2003, Rajan was awarded the inaugural Fischer Black Prize by the American Finance Association for contributions to finance by an economist under 40. His most widely-read book, Saving Capitalism From The Capitalist, was co-authored with fellow Chicago GSB professor Luigi Zingales and published in 2004. His credentials to present India's case at the G-20 meet are impeccable.
Rajan had recently headed the committee on financial sector reforms in the country. In that, he had called for Parliament, through the finance ministry, to set a specific remit for financial sector regulators every five years. The report had also said the regulators should report to a standing committee of Parliament to explain the progress they have made on their remit.
The report made several other suggestions including that the Reserve Bank of India [Get Quote] should have a single objective -- low inflation. The suggestions did not go down well with some commentators. One even went on to ask if India was to become Rajan's guinea pig.
Soon after his appointment as adviser, Business Standard reached Rajan to seek his views on the current economic scenario and his likely agenda. He isn't talking to the press at the moment, but once he does in the future, the country would get to hear his views on what needs to be done.
For the time being, an excerpt from an article he wrote for the IMF's Finance & Development quarterly magazine in September 2006 gives a glimpse into what he may have to offer the country of his birth. The volatility in the Indian stock market, Rajan wrote then, 'seemed to mirror a worldwide reassessment of emerging markets, rather than reflect specific concerns about India's future growth.'
He added, 'There is an underlying strength to the Indian economy that will likely continue... In my view, it will be increasingly important for India to exchange its paternalistic, directive government, which seeks to remedy every wrong through a subsidy, a quota, or a scheme, for one that creates an enabling environment for the people and unleashes their entrepreneurial zeal.'
Two years later, Rajan's words seem prescient. What one is less sure of is how much of what he says should be done will be done by the present government in the limited tenure that it has left.
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