Raghuram Govind Rajan (born 3 February 1963) is an Indian economist and the Katherine Dusak
Miller
A miller is a person who operates a Gristmill, mill, a machine to grind a grain (for example corn or wheat) to make flour. Mill (grinding), Milling is among the oldest of human occupations. "Miller", "Milne" and other variants are common surname ...
Distinguished Service Professor of Finance at the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
Booth School of Business
The University of Chicago Booth School of Business (Chicago Booth or Booth) is the graduate business school of the University of Chicago. Founded in 1898, Chicago Booth is the second-oldest business school in the U.S. and is associated with 10 N ...
. Quote: "I am an Indian citizen. I have always been an Indian citizen. I always held an Indian passport. I held an Indian diplomatic passport when my father was in the foreign service and when I travelled on behalf of the Ministry of Finance. I have never applied for the citizenship of another country. I have never been a citizen of another country and have never taken a pledge of allegiance to another country."Crabtree, James (30 August 2013 Raghuram Rajan, academic in a raging storm The Financial Times (requires a subscription), Retrieved 11 November 2014 Between 2003 and 2006 he was Chief Economist and director of research at the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
. From September 2013 through September 2016 he was the 23rd
Governor
A governor is an administrative leader and head of a polity or political region, ranking under the head of state and in some cases, such as governors-general, as the head of state's official representative. Depending on the type of political ...
of the
Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
.
In 2015, during his tenure at the RBI, he became the Vice-Chairman of the
Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work thr ...
.
At the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
Lawrence Summers
Lawrence Henry Summers (born November 30, 1954) is an American economist who served as the 71st United States secretary of the treasury from 1999 to 2001 and as director of the National Economic Council from 2009 to 2010. He also served as pre ...
called the warnings "misguided" and Rajan himself a "
luddite
The Luddites were a secret oath-based organisation of English textile workers in the 19th century who formed a radical faction which destroyed textile machinery. The group is believed to have taken its name from Ned Ludd, a legendary weaver s ...
". However, following the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
, Rajan's views came to be seen as prescient and he was extensively interviewed for the
Academy Awards
The Academy Awards, better known as the Oscars, are awards for artistic and technical merit for the American and international film industry. The awards are regarded by many as the most prestigious, significant awards in the entertainment ind ...
-winning documentary ''
Inside Job
An insider threat is a malicious threat to an organization that comes from people within the organization, such as employees, former employees, contractors or business associates, who have inside information concerning the organization's security ...
'' (2010).
In 2003, Rajan received the inaugural
Fischer Black Prize Fischer Black Prize is a memorial prize awarded in honor of Fischer Black that rewards individual financial research. The prize was established in 2002 and first awarded in 2003. It is awarded to a financial scientist for a body of work that demonst ...
, given every two years by the
American Finance Association
The American Finance Association (AFA) is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939. Its main publication, the ''Journal of Finance'', was first published in 1946.
...
to the financial economist younger than 40 who has made the most significant contribution to the theory and practice of finance. His book, '' Fault Lines: How Hidden Fractures Still Threaten the World Economy'', won the Financial Times/Goldman Sachs Business Book of the Year award in 2010. In 2016, he was named by ''
Time
Time is the continued sequence of existence and events that occurs in an apparently irreversible succession from the past, through the present, into the future. It is a component quantity of various measurements used to sequence events, to ...
'' in its list of the '100 Most Influential People in the World'.
Early life and education
Raghuram Rajan was born on 3 February 1963 in
Bhopal
Bhopal (; ) is the capital city of the Indian state of Madhya Pradesh and the administrative headquarters of both Bhopal district and Bhopal division. It is known as the ''City of Lakes'' due to its various natural and artificial lakes. It i ...
,
Madhya Pradesh
Madhya Pradesh (, ; meaning 'central province') is a state in central India. Its capital is Bhopal, and the largest city is Indore, with Jabalpur, Ujjain, Gwalior, Sagar, and Rewa being the other major cities. Madhya Pradesh is the seco ...
into a
Tamil Brahmin
Tamil Brahmins are an ethnoreligious community of Tamil-speaking Hindu Brahmins, predominantly living in Tamil Nadu, though they number significantly in Telangana, Andhra Pradesh, Kerala, Karnataka, in addition to other regions of India, as wel ...
family.
Assigned to the Intelligence Bureau, R Govindarajan, his father, was posted to Indonesia in 1966. In 1968 he joined the newly created external intelligence unit of the Intelligence Bureau, the
Research and Analysis Wing
The Research and Analysis Wing (abbreviated R&AW; hi, ) is the foreign intelligence agency of India. The agency's primary function is gathering foreign intelligence, counter-terrorism, counter-proliferation, advising Indian policymakers, an ...
(R&AW) where he served as staff officer under R. N. Kao and became part of the "Kaoboys". In 1970 he was posted to Sri Lanka, where Rajan missed school one year because of political turmoil. After Sri Lanka, R Govindarajan was posted to Belgium where the children attended a French school. In 1974 the family returned to India. Throughout his childhood, Rajan presumed his father to be a diplomat since the family traveled on diplomatic passports.Crabtree, James (15 August 2014 Lunch with the FT: Raghuram Rajan The Financial Times, Retrieved 11 November 2014 He was a half-term student of
Campion School, Bhopal
, motto_translation = Joy in the Truth
, patron = Edmund Campion
, city = Bhopal
, state = Madhya Pradesh
, country = India
, coordinates =
, ty ...
Indian Institute of Technology Delhi
The Indian Institute of Technology, Delhi is a public institute of technology located in New Delhi, India. It is one of the 23 IITs created to be Centres of Excellence for training, research and development in science, engineering and technolo ...
for a bachelor's degree in
electrical engineering
Electrical engineering is an engineering discipline concerned with the study, design, and application of equipment, devices, and systems which use electricity, electronics, and electromagnetism. It emerged as an identifiable occupation in the l ...
. In the final year of his four-year degree, he headed the Student Affairs Council. He graduated in 1985 and was awarded the Director's Gold Medal as the best all-round student. In 1987, he earned a
Master of Business Administration
A Master of Business Administration (MBA; also Master's in Business Administration) is a postgraduate degree focused on business administration. The core courses in an MBA program cover various areas of business administration such as accounti ...
from the
Indian Institute of Management Ahmedabad
Indian Institute of Management Ahmedabad (IIM Ahmedabad) is the world's number 1 business school, located in Ahmedabad, Gujarat, India. The school has been accorded the status of an Institute of National Importance by Ministry of Human Resource ...
, graduating with a gold medal for academic performance. He joined the Tata Administrative Services as a management trainee, but left after a few months to join the doctoral program at the
Sloan School of Management
The MIT Sloan School of Management (MIT Sloan or Sloan) is the business school of the Massachusetts Institute of Technology, a private university in Cambridge, Massachusetts.
MIT Sloan offers bachelor's, master's, and doctoral degree programs, a ...
at
Massachusetts Institute of Technology
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
.
In 1991, he received a PhD for his thesis titled ''Essays on Banking'' under the supervision of Stewart Myers, consisting of three essays on the nature of the relationship between a firm or a country, and its creditor banks. The nature of financial systems had witnessed widespread changes in the 1980s, with markets getting deregulated, information becoming more widely available and easier to process, and competition having increased. The established orthodoxy claimed that deregulation must necessarily increase competition, which would translate into greater efficiency. In his thesis, Rajan argued that this might not necessarily be the case. The first essay focused on the choice available to firms between arm's length credit and relationship-based credit. The second focused on the Glass-Steagall Act, and the conflict of interest involved when a commercial lending bank enters into investment banking. The final essay examined why indexation of a country's debt, despite offering potential advantages, seldom featured in debt reduction plans.
He was awarded an honorary doctorate degree by the
London Business School
London Business School (LBS) is a business school and a constituent college of the federal University of London. LBS was founded in 1964 and awards post-graduate degrees (Master's degrees in management and finance, MBA and PhD). Its motto is " ...
in 2012, the
Hong Kong University of Science and Technology
The Hong Kong University of Science and Technology (HKUST) is a public research university in Clear Water Bay Peninsula, New Territories, Hong Kong. Founded in 1991 by the British Hong Kong Government, it was the territory's third institution ...
in 2015. and
Université catholique de Louvain
The Université catholique de Louvain (also known as the Catholic University of Louvain, the English translation of its French name, and the University of Louvain, its official English name) is Belgium's largest French-speaking university. It ...
in 2019 .
Career
Academic career
In 1991, Rajan joined as an assistant professor of finance at the
Booth School of Business
The University of Chicago Booth School of Business (Chicago Booth or Booth) is the graduate business school of the University of Chicago. Founded in 1898, Chicago Booth is the second-oldest business school in the U.S. and is associated with 10 N ...
at the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
, and became a full-time professor in 1995. He has taught as a visiting professor at
Stockholm School of Economics
The Stockholm School of Economics (SSE; sv, Handelshögskolan i Stockholm, HHS) is a private business school located in city district Vasastaden in the central part of Stockholm, Sweden. SSE offers BSc, MSc and MBA programs, along with ...
,
Kellogg School of Management
The Kellogg School of Management at Northwestern University (also known as Kellogg) is the business school of Northwestern University, a private research university in Evanston, Illinois. Founded in 1908, Kellogg is one of the oldest and most p ...
,
MIT Sloan School of Management
The MIT Sloan School of Management (MIT Sloan or Sloan) is the business school of the Massachusetts Institute of Technology, a private university in Cambridge, Massachusetts.
MIT Sloan offers bachelor's, master's, and doctoral degree programs, ...
, and
Indian School of Business
The Indian School of Business (ISB) is a private business school established in India in 2001. It has two parallel campuses in India, in Hyderabad (Telangana) and Mohali (Punjab). It offers certificates in various post-graduate management prog ...
.
Rajan has written extensively on banking, corporate finance, international finance, growth and development, and organisational structures. He is a regular contributor to
Project Syndicate
Project Syndicate is an international media organization that publishes and syndicates commentary and analysis on a variety of global topics. All opinion pieces are published on the ''Project Syndicate'' website, but are also distributed to a wi ...
. He has collaborated with
Douglas Diamond
Douglas Warren Diamond (born October 25, 1953) is an American economist. He is currently the Merton H. Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, where he has taught since 1979. Diamond ...
to produce much-cited work on banks, and their interlinkages with macroeconomic phenomena. He has worked with
Luigi Zingales
Luigi Zingales (; born 8 February 1963 in Padua, Italy) is a finance professor at the University of Chicago Booth School of Business and the author of two widely-reviewed books. His book '' Saving Capitalism from the Capitalists'' (2003) is a stu ...
on the effect of institutions on economic growth, their research showing that development of free financial markets is fundamental to economic modernisation. Rajan and Zingales built on their work to publish '' Saving Capitalism from the Capitalists'' in 2003. The book argued that entrenched incumbents in closed financial markets stifle competition and reforms, thereby inhibiting economic growth. Rajan's 2010 book '' Fault Lines: How Hidden Fractures Still Threaten the World Economy'' examined the fundamental stresses in the American and the global economy that led to the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. He argued that widening income inequality in the US, trade imbalances in the global economy, and the clash between arm's length financial systems, were responsible for bringing about the crisis. The book won the
Financial Times and Goldman Sachs Business Book of the Year Award
''Financial Times'' Business Book of the Year Award is an annual award given to the best business book of the year as determined by the ''Financial Times''. It aims to find the book that has 'the most compelling and enjoyable insight into modern ...
.
The
Research Papers in Economics
Research Papers in Economics (RePEc) is a collaborative effort of hundreds of volunteers in many countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, ...
project ranks him among the world's most influential economists, featuring him among the top 5% of authors. He was awarded the inaugural 2003
Fischer Black Prize Fischer Black Prize is a memorial prize awarded in honor of Fischer Black that rewards individual financial research. The prize was established in 2002 and first awarded in 2003. It is awarded to a financial scientist for a body of work that demonst ...
, given biennially by the
American Finance Association
The American Finance Association (AFA) is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939. Its main publication, the ''Journal of Finance'', was first published in 1946.
...
to the best finance researcher under the age of 40, for his "path-breaking contributions to our knowledge of financial institutions, the workings of the modern corporation, and the causes and consequences of the development of the financial sector across countries."
He became a member of the
American Academy of Arts and Sciences
The American Academy of Arts and Sciences (abbreviation: AAA&S) is one of the oldest learned societies in the United States. It was founded in 1780 during the American Revolution by John Adams, John Hancock, James Bowdoin, Andrew Oliver, and ...
in 2009, and served as the president of the
American Finance Association
The American Finance Association (AFA) is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939. Its main publication, the ''Journal of Finance'', was first published in 1946.
...
in 2011. He is a member of the
Group of Thirty
The Group of Thirty, often abbreviated to G30, is an international body of financiers and academics which aims to deepen understanding of economic and financial issues and to examine consequences of decisions made in the public and private sect ...
international economic body. He has served as a founding member of the academic council of the Indian School of Business since 1998.
Policymaking
International Monetary Fund
In the aftermath of the
1997 Asian financial crisis
The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1 ...
, the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
was facing criticism for its imposition of fiscal
austerity
Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spend ...
and tighter monetary policies on developing nations. Critics, including Nobel laureate and former chief economist at the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
,
Joseph Stiglitz
Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
, held the IMF's policies responsible for increased economic volatility and destabilisation. While the role of the
chief economist Chief economist is a single-position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of respons ...
had previously always been held by a leading macroeconomist, the IMF wanted to strengthen its financial expertise. American economist
Anne Krueger
Anne Osborn Krueger (; born February 12, 1934) is an American economist. She was the World Bank Chief Economist from 1982 to 1986, and the first deputy managing director of the International Monetary Fund (IMF) from 2001 to 2006. She is currently ...
, then the IMF's first deputy managing director, had recently read Rajan's book '' Saving Capitalism from the Capitalists'', and reached out to him to understand if he would be interested. Although Rajan seemed to harbour reservations initially, reportedly telling her, "Well, Anne, I don't know any macroeconomics", he appeared for an interview, and was subsequently appointed. In announcing his appointment, IMF managing director
Horst Köhler
Horst Köhler (; born 22 February 1943) is a German politician who served as President of Germany from 2004 to 2010. As the candidate of the two Christian Democratic sister parties, the Christian Democratic Union of Germany, CDU (of which he is ...
noted that Rajan's "particular experience in financial sector issues will help strengthen the IMF's role as a centre of excellence in macroeconomic and financial sector stability." At 40, he was the youngest individual, and the first born in an emerging-market nation, to be appointed the chief economist at the IMF. He served in the position from October 2003 to December 2006.
At the IMF, Rajan laid the groundwork for integrating financial sector analysis into the IMF's economic country models. He also led a team to assist some major economies in reducing balance of payments imbalances. During his tenure the Research Department, which Rajan led, contributed to a complete review of the IMF's medium-term strategy, worked on introducing modern modelling and exchange rate assessment techniques to the IMF's consultations with member countries, and analysed the growth and integration of China and India into the world economy. While he largely kept fiscal austerity policies intact, on occasions he also published research that went against the prevailing orthodoxy at the IMF. A 2005 paper, published with
Arvind Subramanian
Arvind Subramanian is an Indian economist and the former Chief Economic Advisor to the Government of India, having served from 16 October 2014 to 20 June 2018. Subramanian is currently a Senior Fellow at the Watson Institute for International ...
, questioned the efficacy of foreign aid, arguing that aid inflows have adverse effects on growth in developing economies. A 2006 paper, published with Eswar Prasad and Arvind Subramanian, concluded that while growth and the extent of foreign financing were positively correlated in industrial countries, non-industrial countries that had relied on foreign finance had grown slower than those that had not.
While he was asked to stay on as the chief economist for a second term, Rajan left after one term as the University of Chicago indicated that his leave could not be extended.
Montek Singh Ahluwalia
Montek Singh Ahluwalia (born 24 November 1943) is an Indian economist and civil servant who was the Deputy Chairman of the Planning Commission of India, a position which carried the rank of a Cabinet Minister. He tendered his resignation for t ...
, drafted Rajan to write a report proposing the next generation of financial sector reforms in India. A High Level Committee on Financial Sector Reforms was constituted consisting of twelve members, with Rajan as chairman. The committee, in its report titled ''A Hundred Small Steps'', recommended broad-based reforms across the financial sector, arguing that instead of focusing "on a few large, and usually politically controversial steps", India must "take a hundred small steps in the same direction".
In November 2008, Indian Prime Minister
Dr Manmohan Singh
Manmohan Singh (; born 26 September 1932) is an Indian politician, economist and statesman who served as the 13th prime minister of India from 2004 to 2014. He is also the third longest-serving prime minister after Jawaharlal Nehru and Ind ...
appointed Rajan as an honorary economic adviser, a role that involved writing policy notes at Singh's request. On 10 August 2012 Rajan was appointed as
chief economic adviser
Chief may refer to:
Title or rank
Military and law enforcement
* Chief master sergeant, the ninth, and highest, enlisted rank in the U.S. Air Force and U.S. Space Force
* Chief of police, the head of a police department
* Chief of the boa ...
to India's
Ministry of Finance A ministry of finance is a part of the government in most countries that is responsible for matters related to the finance.
Lists of current ministries of finance
Named "Ministry"
* Ministry of Finance (Afghanistan)
* Ministry of Finance and Eco ...
, succeeding
Kaushik Basu
Kaushik Basu (born 9 January 1952) is an Indian economist who was Chief Economist of the World Bank from 2012 to 2016. He is the C. Marks Professor of International Studies and Professor of Economics at Cornell University, and academic advisory ...
in the role. He prepared the Economic Survey of India for the year 2012–13. In the annual survey, he urged the government to reduce spending and subsidies, and recommended the redirection of Indians from agriculture to service and skilled manufacturing sector. He was also skeptical of the Food Security Bill in light of the rising fiscal deficits.
Reserve Bank of India
On 6 August 2013 it was announced that Rajan would take over as the
Governor
A governor is an administrative leader and head of a polity or political region, ranking under the head of state and in some cases, such as governors-general, as the head of state's official representative. Depending on the type of political ...
of the
Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
for a term of 3 years, succeeding
Duvvuri Subbarao
Duvvuri Subbarao (born 11 August 1949) is an Indian economist, Central Banker, and retired IAS officer. He was the 22nd Governor of Reserve Bank of India, served under Prime Minister Dr. Manmohan Singh. After stepping down from RBI, he was a Dist ...
. On 5 September 2013 he took charge as the 23rd governor, at which point he took a leave of absence from the
University of Chicago Booth School of Business
The University of Chicago Booth School of Business (Chicago Booth or Booth) is the graduate business school of the University of Chicago. Founded in 1898, Chicago Booth is the second-oldest business school in the U.S. and is associated with 10 N ...
.
In his first speech as RBI governor, Rajan promised banking reforms and eased curbs on foreign banking, following which the
BSE SENSEX
The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply SENSEX) is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange. The 30 ...
rose by 333 points or 1.83%. After his first day at office, the rupee rose 2.1% against the US dollar. As Governor of the RBI, Rajan made curbing
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
his primary focus, bringing down retail inflation from 9.8% in September 2013 to 3.78% in July 2015 – the lowest since the 1990s. Wholesale inflation came down from 6.1% in September 2013 to a historic low of -4.05% in July 2015.
In a 2014 interview, Rajan said his major targets as governor of the Reserve Bank of India were to lower inflation, increase savings and deepen financial markets, of which he believed reducing inflation was the most important. A panel he appointed proposed an inflation target for India of 6% for January 2016 and 4%(+-2%) thereafter. Under Rajan, the RBI adopted
consumer price index
A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time.
Overview
A CPI is a statistica ...
(CPI) as the key indicator of inflation, which is the global norm, despite the government recommending otherwise. Foreign exchange reserves of India grew by about 30% to the tune of $380 billion in two years. Under Rajan, the RBI licensed two
universal bank
A universal bank participates in many kinds of banking activities and is both a commercial bank and an investment bank as well as providing other financial services such as insurance.payments banks to extend banking services to the nearly two-thirds of the population who are still deprived of banking facilities.
During his tenure, he enforced two-factor authentication of domestic credit card transactions to ensure the safety of customers. However, in an apparent contradiction of his previous stance of encouraging customers to use banks, he also permitted banks to charge customers for conducting ATM transactions beyond a certain number of times per month, at a time when the Indian Government was actively attempting to promote financial inclusion through its
Pradhan Mantri Jan Dhan Yojana
Pradhan Mantri Jan Dhan Yojana () is a financial inclusion program of the Government of India open to Indian citizens (minors of age 10 and older can also open an account with a guardian to manage it), that aims to expand affordable access to f ...
scheme, which effectively prevented people from easily accessing their own savings and discouraged them from using formal banking channels.
Media reports positioned Rajan as a prospective successor to
Christine Lagarde
Christine Madeleine Odette Lagarde (; née Lallouette, ; born 1 January 1956) is a French politician and lawyer who has been serving as President of the European Central Bank since 2019. She previously served as the 11th managing director of the ...
as head of the IMF when her term expired in 2016,Verma, Sid (October 2014 Rajan's surgical strikes Euromoney, Retrieved 11 November 2014 even as Rajan himself countered such speculation. This did not eventually come to bear, as Lagarde was nominated for a second term at the end of her tenure. On 9 November 2015, Rajan was appointed as Vice-Chairman of the
Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work thr ...
(BIS).
In May 2016, in a letter to Prime Minister
Narendra Modi
Narendra Damodardas Modi (; born 17 September 1950) is an Indian politician serving as the 14th and current Prime Minister of India since 2014. Modi was the Chief Minister of Gujarat from 2001 to 2014 and is the Member of Parliament from ...
,
Rajya Sabha MP
A Member of Parliament in the Rajya Sabha (abbreviated: MP) is the representative of the Indian states to the one of the two houses of the Parliament of India (Rajya Sabha). Rajya Sabha MPs are elected by the electoral college of the elected ...
Subramanian Swamy
Subramanian Swamy (born 15 September 1939) is an Indian politician, economist and statistician. Before joining politics, he was a professor of Mathematical Economics at the Indian Institute of Technology, Delhi. He is known for his Hindu na ...
leveled several allegations against Rajan. He accused Rajan of raising interest rate to the detriment of small and medium industries. He also claimed that Rajan has been sending confidential and sensitive financial information using his
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
unsecured personal email address. But Rajan said that these allegations are fundamentally wrong and baseless and addressing them would amount to giving them legitimacy.
On 18 June 2016, Rajan announced that he would not be serving a second term as RBI Governor, and planned to return to academia. In September 2017, Rajan revealed that though he was willing to take an extension and serve a second term as RBI Governor, the government had not extended any offer to him which left him with no choice but to return to the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
. He also denied claims that the University of Chicago had, at that time, refused to accept his leave of absence to continue for a second term.
Economic and political views
Rajan's economic and political views were influenced by his experience of the Indian economy during The Emergency. As an economist, he was therefore wary of the risks of both unnecessary government intervention as well as unregulated financial markets, while remaining a champion of capitalism.
Financial markets
Rajan advocates giving financial markets a greater role in the economy. In the book ''Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity'' co-authored with Luigi Zingales, the two authors argue in favour of deregulated financial markets in order to facilitate access of the poor to finance: "Capitalism, or more precisely, the free market system, is the most effective way to organise production and distribution that human beings have found … healthy and competitive financial markets are an extraordinarily effective tool in spreading opportunity and fighting poverty. …Without vibrant, innovative financial markets, economies would ossify and decline." (p 1)
In 2005, at a celebration honouring
Alan Greenspan
Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
, who was about to retire as chairman of the
US Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom."Justin Lahart. Mr Rajan Was Unpopular (But Prescient) at Greenspan Party . ''
Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
''. 2 January 2009. Retrieved on 18 August 2012. Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."
The response to Rajan's paper at the time was negative. For example, former U.S. Treasury Secretary and former Harvard President
Lawrence Summers
Lawrence Henry Summers (born November 30, 1954) is an American economist who served as the 71st United States secretary of the treasury from 1999 to 2001 and as director of the National Economic Council from 2009 to 2010. He also served as pre ...
called the warnings "misguided" and Rajan himself a "luddite". However, following the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
, Rajan's views came to be seen as prescient; by January 2009, ''
The Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' proclaimed that now, "few are dismissing his ideas." In fact, Rajan was extensively interviewed on the global crisis for the Academy Award-winning documentary film ''
Inside Job
An insider threat is a malicious threat to an organization that comes from people within the organization, such as employees, former employees, contractors or business associates, who have inside information concerning the organization's security ...
''. Rajan wrote in May 2012 that the causes of the ongoing economic crisis in the US and Europe in the 2008–2012 period were substantially due to workforce competitiveness issues in the globalisation era, which politicians attempted to "paper-over" with easy credit. He proposed
supply-side
Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit fr ...
solutions of a long-term structural or national competitiveness nature: "The industrial countries should treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades... Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies. In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track. In southern Europe, by contrast, it means removing the regulations that protect firms and workers from competition and shrinking the government's presence in a number of areas, in the process eliminating unnecessary, unproductive jobs."Rajan, Raghuram G. (2012-05-01 Foreign Affairs-Rhaguram Rajan-The True Lessons of the Financial Crisis-May/June 2012 Foreignaffairs.com. Retrieved on 2012-05-16.
Austerity vs stimulus
During May 2012, Rajan and
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was th ...
expressed differing views on how to reinvigorate the economies in the US and Europe, with Krugman mentioning Rajan by name in an opinion editorial. This debate occurred against the backdrop of a significant "austerity vs stimulus" debate occurring at the time, with some economists arguing one side or the other or a combination of both strategies. In an article in ''
Foreign Affairs
''Foreign Affairs'' is an American magazine of international relations and U.S. foreign policy published by the Council on Foreign Relations, a nonprofit, nonpartisan, membership organization and think tank specializing in U.S. foreign policy and ...
'' magazine, Rajan advocated structural or supply-side reforms to improve competitiveness of the workforce to better adapt to globalisation, while also supporting fiscal austerity measures (E.g., raising taxes and cutting spending), although he conceded that austerity could slow economies in the short-run and cause significant "pain" for certain constituencies. Krugman rejected this focus on structural reforms combined with fiscal austerity. Instead he advocated traditional Keynesian fiscal (government spending and investment) and monetary stimulus, arguing that the primary factor slowing the developed economies at that time was a general shortfall in demand across all sectors of the economy, not structural or supply-side factors that affected particular sectors.
As far as his position on India is concerned, Rajan stayed away from th Bhagwati vs. Sen debate and has tended to sympathize with both sides of the so-called "growth vs. welfare" argument. While Rajan's views in general align with Bhagwati's (with respect to how growth is seen as the main source of development), he has also argued for government involvement in health and education like Sen, and has pointed to the resultant threat of oligarchy or alienation of the poor.
In 2019, Rajan said that, following the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
and the imposition of
austerity
Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spend ...
, contemporary
capitalism
Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
"is under serious threat" because it has stopped providing opportunities for the many and is now facing a possible revolt from the masses.
Demonetization in India
In interviews in September 2017, Rajan said the Government of India had consulted the Reserve Bank of India, during his Governorship, on the issue of demonetization but never asked to take a decision. He said the RBI was against the move and warned the government of the potential negative effects. Rajan also termed the currency notes ban exercise as, "One cannot in any way say it has been an economic success". In addition to his work at the University of Chicago and RBI, Raghuram is also a member of the
Berggruen Institute
The Berggruen Institute is a Los Angeles-based think tank founded by Nicolas Berggruen.
History
In 2010, Nicolas Berggruen and Nathan Gardels sat down with a group of academics, business leaders, and political veterans in California to discus ...
's 21st Century Council.
Awards
* In 2003, Rajan won the inaugural
Fischer Black Prize Fischer Black Prize is a memorial prize awarded in honor of Fischer Black that rewards individual financial research. The prize was established in 2002 and first awarded in 2003. It is awarded to a financial scientist for a body of work that demonst ...
awarded by the American Finance Association for contributions to the theory and practice of finance by an economist under age 40.
* In February 2010
NASSCOM
The National Association of Software and Service Companies (NASSCOM) is an Indian non-governmental trade association and advocacy group, focused mainly on the technology industry of India. Established in 1988, NASSCOM is a non-profit organis ...
named him Global Indian at its 7th annual global leadership awards.
* In 2010, he was awarded the
Financial Times and McKinsey Business Book of the Year Award
''Financial Times'' Business Book of the Year Award is an annual award given to the best business book of the year as determined by the ''Financial Times''. It aims to find the book that has 'the most compelling and enjoyable insight into modern ...
Infosys Prize
The Infosys Prize is an annual award given to scientists, researchers, engineers and social scientists of Indian origin (not necessarily born in India) by the Infosys Science Foundation and ranks among the highest monetary awards in India to re ...
for Social Sciences – Economics ''for his work in analyzing the contribution of financial development to economic growth, as well as the potentially harmful effects of dysfunctional incentives that lead to excessive risk-taking''.
* In 2013, he was awarded the fifth Deutsche Bank Prize in Financial Economics for his "ground-breaking research work which influenced financial and macro-economic policies around the world".
* In 2014 he was conferred with the "Governor of the Year Award 2014" from London-based financial journal Central Banking.
* In March 2019, he was awarded "Yashwantrao Chavan National Award 2018" for his contribution to economic development.
Random House
Random House is an American book publisher and the largest general-interest paperback publisher in the world. The company has several independently managed subsidiaries around the world. It is part of Penguin Random House, which is owned by Germ ...
. Co-authored with fellow Chicago Booth professor
Luigi Zingales
Luigi Zingales (; born 8 February 1963 in Padua, Italy) is a finance professor at the University of Chicago Booth School of Business and the author of two widely-reviewed books. His book '' Saving Capitalism from the Capitalists'' (2003) is a stu ...
Financial Times and Goldman Sachs Business Book of the Year Award
''Financial Times'' Business Book of the Year Award is an annual award given to the best business book of the year as determined by the ''Financial Times''. It aims to find the book that has 'the most compelling and enjoyable insight into modern ...
for 2010.
* '' I Do What I Do'' (2017), Harper Collins. A collection of speeches delivered during his stint as the Governor of the
Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
Penguin Press
Penguin Group is a British trade book publisher and part of Penguin Random House, which is owned by the German media conglomerate Bertelsmann. The new company was created by a merger that was finalised on 1 July 2013, with Bertelsmann initial ...
.
*''What the Economy Needs Now'' (2019),
Juggernaut Books
Juggernaut Books (informally Juggernaut) is digital book publishing house headquartered in New Delhi, India. The publisher emphasizes on short length books written by new writers. It also allows writers to self-publish their books through their ...
. Co-authored.
Rajan has also published numerous articles in finance and economics journals including the ''
American Economic Review
The ''American Economic Review'' is a monthly peer-reviewed academic journal published by the American Economic Association. First published in 1911, it is considered one of the most prestigious and highly distinguished journals in the field of ec ...
'', ''
Journal of Economic Perspectives
The ''Journal of Economic Perspectives'' (JEP) is an economic journal published by the American Economic Association. The journal was established in 1987. It is very broad in its scope. According to its editors its purpose is:
#to synthesize and ...
'', ''
Journal of Political Economy
The ''Journal of Political Economy'' is a monthly peer-reviewed academic journal published by the University of Chicago Press. Established by James Laurence Laughlin in 1892, it covers both theoretical and empirical economics. In the past, the ...
'', ''
Journal of Financial Economics
The ''Journal of Financial Economics'' is a peer-reviewed academic journal published by Elsevier, covering the field of finance. It is considered to be one of the premier finance journals. According to the ''Journal Citation Reports'', the journa ...
'', ''
Journal of Finance
''The Journal of Finance'' is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946 and is considered to be one of the premier finance journals. The editor-in-chief ...
Foreign Affairs
''Foreign Affairs'' is an American magazine of international relations and U.S. foreign policy published by the Council on Foreign Relations, a nonprofit, nonpartisan, membership organization and think tank specializing in U.S. foreign policy and ...
''
Personal life
Raghuram Rajan is an Indian citizen and holds a USA
Green Card
A green card, known officially as a permanent resident card, is an identity document which shows that a person has permanent residency in the United States. ("The term 'lawfully admitted for permanent residence' means the status of having been ...
. He is married to Radhika Puri Rajan, whom he met while they were both students at
IIM Ahmedabad
Indian Institute of Management Ahmedabad (IIM Ahmedabad) is the world's number 1 business school, located in Ahmedabad, Gujarat, India. The school has been accorded the status of an Institute of National Importance by Ministry of Human Resource ...
. Radhika teaches at
University of Chicago Law School
The University of Chicago Law School is the law school of the University of Chicago, a private research university in Chicago, Illinois. It is consistently ranked among the best and most prestigious law schools in the world, and has many dist ...
. She is also an Adjunct Associate Professor of
Behavioral Science
Behavioral sciences explore the cognitive processes within organisms and the behavioral interactions between organisms in the natural world. It involves the systematic analysis and investigation of human and animal behavior through naturalistic o ...
at the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
Booth School of Business
The University of Chicago Booth School of Business (Chicago Booth or Booth) is the graduate business school of the University of Chicago. Founded in 1898, Chicago Booth is the second-oldest business school in the U.S. and is associated with 10 N ...
. They have a daughter and a son.
Rajan's elder brother works for a solar company in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. Rajan's sister is a French teacher in
New Delhi
New Delhi (, , ''Naī Dillī'') is the capital of India and a part of the National Capital Territory of Delhi (NCT). New Delhi is the seat of all three branches of the government of India, hosting the Rashtrapati Bhavan, Parliament House ...
, and is married to an
Indian Administrative Service
The Indian Administrative Service (IAS) is the administrative arm of the All India Services of Government of India. Considered the premier civil service of India, the IAS is one of the three arms of the All India Services along with the Indian ...
officer. Rajan's younger brother, Mukund Rajan, was born in
Chennai
Chennai (, ), formerly known as Madras ( the official name until 1996), is the capital city of Tamil Nadu, the southernmost Indian state. The largest city of the state in area and population, Chennai is located on the Coromandel Coast of th ...
in 1968. He was the Brand Custodian and Chief Ethics Officer of
Tata Sons
Tata Sons Private Limited is the parent company of the Tata Group and holds the bulk of shareholding in the Tata group of companies including their land holdings across India, tea estates and steel plants. It is a privately owned conglomerate of ...
Rajan is a vegetarian. He likes the outdoors and plays tennis and squash. He enjoys reading
Tolstoy
Count Lev Nikolayevich TolstoyTolstoy pronounced his first name as , which corresponds to the romanization ''Lyov''. () (; russian: link=no, Лев Николаевич Толстой,In Tolstoy's day, his name was written as in pre-refor ...
,
J. R. R. Tolkien
John Ronald Reuel Tolkien (, ; 3 January 1892 – 2 September 1973) was an English writer and philology, philologist. He was the author of the high fantasy works ''The Hobbit'' and ''The Lord of the Rings''.
From 1925 to 1945, Tolkien was ...
and
Upamanyu Chatterjee
Upamanyu Chatterjee (born 1959) is an author and a retired Indian civil servant. His works include the novel '' English, August: An Indian story'', '' The Last Burden'', '' The Mammaries of the Welfare State'' and ''Weight Loss''. In 2008, he was ...
. Rajan appeared on
Siddharth Basu
Siddhartha Basu is an Indian television producer-director and quiz show host, widely regarded as the "Father of Indian television quizzing".
He is best known for hosting shows such as ''Quiz Time'', ''Mastermind India'' and ''University Chall ...
's quiz show ''Quiz Time'', telecasted on the national television channel
Doordarshan
Doordarshan (abbreviated as DD; Hindi: , ) is an Indian public service broadcaster founded by the Government of India, owned by the Ministry of Information and Broadcasting and one of Prasar Bharati's two divisions. One of India's largest bro ...
, in 1985, teaming up with his batchmate
Jayant Sinha
Jayant Sinha (born 21 April 1963) is an Indian politician who is the Member of Indian Parliament and formerly the Minister of State for Finance and the Minister of State for Civil Aviation in the Government of India. Sinha is currently the Ch ...
to represent IIT Delhi. He has also participated in various marathons, such as the Standard Chartered Mumbai Marathon 2015.