Ending months of suspense, Reserve Bank of India (RBI) Governor Raghuram Govind Rajan formally told his colleagues on Saturday that he is not keen on a second term at the helm of the country’s central bank and will return to academia when his tenure ends in September.
Soon after, Finance Minister Arun Jaitley, while appreciating Rajan’s role, said a successor will be named soon.
Rajan’s decision was conveyed in an 888-word letter by him to the RBI staff, a copy of which was obtained by IANS — one in which he has listed what the central bank has managed to achieve in the past three years and what remains to be done, although that process has also been initiated.
Reflecting on his term as the 23rd governor of the central bank since September 2013 — which has seen praise and also a fair share of criticism — Rajan said the agenda pursued by his team was to help nurse India back on the path of recovery first, and then growth, and keep prices in check.
He went on to allude that much was accomplished, even as a part of that onerous task remained a work in progress — while also indicating that he was ready to see that through as well, but eventually decided against it.
“While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as governor ends on September 4, 2016,” he said.
“I will, of course, always be available to serve my country when needed,” he added.
“I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished.”
Stating that he will be returning to the US university, from where he is on a sabbatical, Rajan listed his unfinished agenda as seeing a monetary policy panel in place to broadly guide the central bank, and a clean-up of banks’ balance sheets.
Listing the achievements, since the time India’s growth was high and inflation also high when he took over, the governor said price control, improving foreign exchange reserves, currency stability, an eventual lowering of interest rates and extending a helping hand for reforms stood out.
He hoped the unfinished agenda for which the path had been paved will be pursued by his successor — the 24th governor of the Reserve Bank — again a matter of much debate and interest, with some names already doing the rounds.
Much speculation had gone into a possible second term for Rajan, hailed by many as the best governor the central bank could have possibly had on its board during the difficult times India was going through, but also with some share of critics.
In fact, a petition floated online pushing for a second term for this IIT alumnus, had tens of thousands of netizens rooting for him, even as some critics like BJP leader Subramanian Swamy were particularly harsh towards him, asking Prime Minister Narendra Modi to let him go. Both Modi and Finance Minister Jaitley remained silent all along.
On Saturday, Jaitley said: “The government appreciates good work done by RBI Governor Raghuram Rajan and respects his decision.” He said a successor would announced “soon”.
Speculation gathered momentum when Anandabazar Patrika, quoting sources close to Rajan, said in a report two weeks ago that he was not interested in a second term, which got some credence when Modi said: “I don’t think this administrative subject should be an issue of interest to the media.”
Now that he has said no, RaghuramRajan is the hashtag trending at the top, mostly in his support.
Infosys co-founder N.R. Narayana Murthy, who has been batting, in fact, for not one but two more terms for Rajan, said: “Have no doubts he will continue to add value to the country. He deserves more dignity than what he was treated with.”
Swamy remained unrelenting. “Raghuram Rajan was an employee of the Government of India. We don’t select employees on the basis of popular vote — and, too, of industrialists,” he said.
Politicians seldom like someone outside their tribe shooting off his or her mouth. But a doctoral degree holder from the Massachusetts Institute of Technology, Rajan has always been outspoken — often getting pushed onto the wrong side of a debate.
The latest being his remarks on India being the king in a land of the blind which did not go down well with many, particularly the BJP leadership and notably Commerce and Industry Minister Nirmala Sitharaman.
But Rajan, who has also served in the International Monetary Fund, has been used to such critics.
Before he shot to global fame with his prediction of a looming global financial crisis way back in 2005, he had to face ridicule from such luminaries as then Federal Reserve chief Alan Greenspan and Nobel laureate Paul Krugman. He had the last laugh, so to say, when that became a reality.
What had started as an academic paper titled “Has Financial Development Made the World Riskier?” also eventually resulted in an Academy Award-winning documentary called “Inside Job”, bringing Rajan further into global limelight.