Mumbai: India’s new central bank chief Raghuram Rajan is an outspoken economist described by one newspaper as having “rock star appeal”, who famously predicted the 2008 global financial crisis years in advance.
Rajan, a staunch economic reformer and withering critic of Indian corruption and bureaucracy, took the helm of the Reserve Bank of India on Wednesday as the country weathers its worst economic storm in years.
Rajan’s impeccable credentials, which include a stint as IMF chief economist, will be put to the test as he inherits an economy struggling with a ballooning current account deficit, a plummeting rupee and decade-low enonomic growth.
He left his post at the prestigious University of Chicago’s Booth School of Business and returned to India last year, at the behest of Prime Minister Manmohan Singh, to serve as a financial adviser.
His appointment as governor comes as some analysts fear the once-booming economy could be heading for a meltdown. Investors will be looking to him initially to calm jittery markets and halt the rupee’s slide before trying to boost growth running at below five percent.
However Rajan himself has cautioned against expecting too much too soon - saying there are no “quick fixes”.
“No one can doubt the country’s promise,” the 50-year-old economist said after being named in early August to the post. But he added, “there is no magic wand to make the problems disappear instantaneously”.
Rajan, the son of a diplomat, studied engineering at the Indian Institute of Technology and completed a doctorate in finance in 1991 at the Massachusetts Institute of Technology.
He won fame 14 years later when as IMF chief economist he published a paper that said sub-prime lending could lead to disaster, and warned of the global financial crisis three years before it struck.
His dire warning earned the scorn of former US Treasury Secretary Larry Summers, who dismissed him as “misguided” and “a Luddite”.
The former finance professor, who hails from the southern state of Tamil Nadu, has long been a darling of the Indian media, leading one newspaper to describe him as an “economist with rock star appeal”.
He is author of the acclaimed book “Fault Lines” on how hidden financial fractures threaten the world economy, and has been described by analysts as an unflappable economist and a “creative, out-of-the box thinker”.
Some observers have also suggested that should India need to approach the IMF for a bailout as it did in 1991 — a prospect the finance ministry firmly dismisses — Rajan’s connections with the world body could come in handy.