Rajan: Man who predicted the 2008 economic crisis

New Delhi, Aug 6 (IANS) Raghuram Govind Rajan, chief economic adviser in the finance ministry, who was Tuesday named the next governor of the Reserve Bank of India (RBI), brings with him wide experience as a banker, academician and technocrat, having served institutions such as the International Monetary Fund and taught at the University of Chicago.

At 50, Rajan will also be among the youngest to occupy the high office at Mint Street in Mumbai, where he takes over from incumbent Duvvuri Subbarao on Sep 5. But holding high positions at young age is not new for this Bhopal-born financial economist.

An alumnus of the Indian Institute of Technology (IIT) in New Delhi, the Indian Institute of Management (IIM), Ahmedabad, and the Massachusetts Institute of Technology, and a gold medallist all through, Rajan was the youngest economic-counsellor and chief economist at the IMF from October 2003 to December 2006.

His peers, in a poll conducted by The Economist, called him an economist "with the most important ideas for a post-crisis world", which was a rare distinction for a person of Rajan's age. He was all of 48 then.

He shot to global fame when his prediction of a looming global financial crisis way back in 2005, eventually became a reality three years later - even though, in the interim, he had to face ridicule of such luminaries as then Federal Reserve chief Alan Greenspan and Nobel laureate Paul Krugman.

What started as a paper titled "Has Financial Development Made the World Riskier?", resulted in an Academy Award-winning documentary called "Inside Job" bringing Rajan into global limelight, as also the sights of Prime Minister Manmohan Singh who made him honorary economic advisor.

During that tenure, Rajan chaired a panel appointed by the Planning Commission, and his paper is the document which is guiding policy makers on the current financial sector reforms, as also issues like financial inclusion and direct cash transfer of subsidies.

His appointment comes at a time when the Indian economy is passing through rough weather and the government and the central bank are not particularly seen to be in sync on ways to handle the situation. But Rajan feels the worst will be overcome.

"These are challenging times for the Indian economy, though no one can have any doubt about the country's promise," he said after being named Governor-elect, adding that the government and the central bank were working together on this.

"The Reserve Bank is a great institution with a tradition of integrity, independence and professionalism," he said, honoured by the new responsibilities rested on him.

Chairman of the Prime Minister's economic advisory council C Rangarajan said Rajan is an excellent choice for the central bank governor position.

"Rajan is now familiar with the Indian economy, expect him to handle all issues in a mature manner," Rangarajan, also a former RBI governor, said while reacting on new appointment.


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