Money Matters - Simplified

'The Episode' of big expectations from Raghuram Rajan

The New Reserve Bank of India (RBI) chief Raghuram Govind Rajan started his term with a bang, announcing a number of measures to support the weak rupee and unveiling a raft of steps to liberalise financial markets and the banking sector.

Raghuram Govind Rajan 50, a University of Chicago economist with outstanding academic credentials, who started his term on 5th September 2013, is riddled with high expectations from the Government, India Inc and General Public alike thus mounting the pressure on Rajan.

It has been reported that Raghuram Rajan will be the lynchpin of financial sector reforms of India. Financial sector reforms were stalled after the global recession in the belief that India's conservatism had saved it from the effects of the meltdown which wasn't the right lesson to draw from the experience, Rajan said in his 2008 report on financial sector reforms, 'A Hundred Small Steps'.

"These are not easy times, and the economy faces challenges. At the same time, India is a fundamentally sound economy with a bright future,” he said addressing a media conference shortly after taking charge as the 23rd governor of the RBI.

Some economists expect Rajan to build the case for shifting the central bank's key inflation measure to the consumer price index from the wholesale price index.

Rajan's most and foremost emphasis has been on creating a 'clear framework' of working and to finish the creation of a nexus between Politicians and Businessmen which would cause the end of competition in the market.

The highest expectation from Rajan is to stablise the weak rupee and also create policies that would lure foreign investment into India, a decline that caused the initial fall in the rupee rate.

But things are looking up from here for Rajan as the new Governor of RBI. As soon as he was appointed for the task, the rupee rate witnessed a fall to an average of 62 rupees against one US dollar.

It has also been reported by the Deutsche Bank that highlights that the fears of foreign institutional investors (FIIs) are receding as they have bought shares worth $1 billion over the past eight sessions following RBI Governor Raghuram Rajan's recent announcements.