Saturday, June 18, 2016

Rajan exit - Will it impact?

Many possible exit in the economic world has been doing news. Whether Britain will exit Euro, Greek will be exited out of Euo. The other exit which has been making a lot of news in India is Rajan exit. Whether Raghuram Rajan will exit? I don't remember any time in past where a post like RBI Governor has made so much of news. Most of the people don't even appreciate what RBI does? For them the only important thing is if their EMI interest rates will go down or go up. For good or bad reasons, this government has made many other posts so much talked. Now India knows about FTII, Censor Board and recently NIFT.

Will Rajan exit be detrimental to Indian economy. Chidambaram and his strange friendly fellow in this, Swamy, think that it will be in positive way. Chidambaram being a political foe is natural to take such a stand. Swamy, many time its difficult to understand his rationale behind his stand. However one thing I would appreciate is his doggedness to pursue any matter, without being concerned about its implications on his friends and foes alike.

Yes Rajan has been very effective. In general, I would say most of the RBI governors in India has done a good job as far as handling the economy goes. One of the reason is also not a fetish with growth rates. However there are signs of that changing soon. Just focussing on the growth rate is dangerous, as this leads to steps which become short term in nature. This is one aspect which I believer Rajan has handled tactfully. "I am Raghuram Rajan and I do what I do"

Coming back to RBI governor post, I am sure there are enough alternatives for the post. A fresh perspective may help things to take to next level. Rajan would have been good, if he would have opted for second term. However once he has declared his intention of going back, let's honour it. The thing that world will be looking to India is, who fills the post? 

I am no expert to dole out names. Honestly I don't understand many of Macroeconomics of India and world. However I am hoping that the decision of the governor will be driven by what will help the Indian economy in long run, and not someone who will toe the line of short term measures. A strong and level headed RBI governor is important for a stable future. As the great British economist Alfred Marshall once spoke of "Cool heads but warm hearts" in framing economic policy.

The bigger question is "Who is going to be the next Governor of RBI?"

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