Who is he?
Since August 2012, Raghuram Rajan has served as chief economic adviser in the Finance Ministry of India. Preceding his current position, Rajan worked as a chief economist for the IMF and served as an honorary economic adviser to Prime Minister Manmohan Singh. Additionally, he chaired the Planning Commission’s committee on financial sector reforms.
Rajan received degrees from IIM-Ahmedabad and IIT-Delhi and a doctorate from the Massachusetts Institute of Technology. He is currently a professor of finance at the University of Chicago’s Booth School of Business. Dr. Rajan predicted an impending financial crisis in 2005 and later chronicled the 2008 housing crisis in the United States, in his book Fault Lines: How Hidden Fractures Still Threaten the World Economy, published in August 2010.
Why is he in the news?
Raghuram Rajan will assume the position of Governor of the Reserve Bank of India (RBI), after the current governor, Duvvuri Subbarao, steps down from the post in early September 2013. Prime Minister Singh has approved Rajan’s appointment for a three year term.
What can we expect from him?
Rajan will have an uphill battle to restore the Indian economy. Economic growth in the past year was about 5% compared to an average 8% for the ten preceding years. In the past 5 years, the trade deficit has increased from $120 billion to $190 billion and the rupee has hit a record-low 61.8 rupees to $1 — a 35% reduction. Inflation is a serious concern, as the majority of India’s population is highly affected by even a small rise in the price of basic goods.
Dr. Rajan has been vocal about his recommendations for reform measures to revive the Indian economy. He advocates increasing investment and savings in the place of consumption, a transition which will require easing regulations and improving economic institutions. Rajan has said he supports further economic liberalization, or a “second generation of reforms,” as a way to reenergize the economy. He has also specifically supported reforming the nation’s subsidy programs, in particular raising the price of fuel subsidies.