Raghuram Rajan is a hit on first day, can he sustain it?

Raghuram Rajan receives rock-star welcome on his first day in office as Governor of the Reserve Bank of India, reports Faisal Kidwai. Now begins the tough part.

India’s central bank has had 22 governors since its establishment on April 1, 1935, but it’s hard to believe that any of them got the kind of attention Raghuram Rajan received on his first day in office on Wednesday.

He has been the talk of global media since his appointment as the country’s top banker, and his rock-star fame was on full display on a late sunny afternoon on the 15th floor of equally imposing Reserve Bank of India’s headquarters at Ballard Estate in Mumbai on Wednesday.

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Flanked by Deputy Governors KC Chakrabarty, Anand Sinha, HR Khan and Urjit Patel, Rajan’s athletic frame filled the chair as his dark big eyes scanned the conference room full of journalists and photographers, all jostling to catch a glimpse of the man about to play a crucial role in India’s destiny.

Rajan, whose handsome looks and photogenic appeal make him appear much younger than he is -- 50 years old to be exact -- waited patiently as camera flashes lit up his boyish face and then began laying out a raft of measures, such as opening new banks and cutting down risky loans, in a soft and measured tone without displaying any sign of the enormity of the task he faces.

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While his calm composure kept any apprehensions or jitters well-hidden, he, more than anybody else, knows that he has been tasked to steer a ship that is heading towards an iceberg.

But the million-dollar question is, can he steer it? The consensus seems to be that even for a brilliant academic like Rajan it is a tough job.

“He is coming in at the worst possible time. He has to rein in the rupee, inflation and current account deficit and all this when general elections are round the corner. I really don’t know how he can turn around the economy when the government has both eyes on the election,” says an investor.

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Another businessman was equally pessimistic. “It’s the government, not just the RBI, that needs to take hard measures, such as removing subsidies, approving stuck projects and reforming laws. What can the central bank do when the government is moving in a different direction? Things will only improve after elections.”

Although the economy seems to be in a free-fall, it is a totally different case when it comes to the man himself. Rajan, who will occupy the 18th floor office at the RBI headquarters, has a resume that most can only dream of and envy.

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The son of an Indian Police Service officer, he spent his early years in Indonesia, Sri Lanka and Belgium and then joined Indian Institute of Technology in New Delhi, got an MBA from the Indian Institute of Management Ahmedabad and a doctorate from the Massachusetts Institute of Technology.

From there he went to University of Chicago, the mecca of free-market economists, where he was awarded the prestigious Fischer Black Prize for the best academic in his field under 40 and then became the youngest-ever chief economist at the International Monetary Fund. 

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But what he is most famous for is the paper he presented in 2005 that warned of economic crisis. At that time many experts made fun of his dire predictions, but when the 2008 credit crunch hit the global markets everybody sat up and took notice of the relatively young academic.

Rajan can speak Tamil, English and French, and a bit of Hindi, loves running marathons, swimming, squash and tennis. He is married to Radhika, whom he met at IIM Ahmedabad, and the couple have a son and daughter. His younger brother, Mukund Rajan, is Chief Ethics Officer with the Tata group. 

It’s his love for sport and competitive zeal that can turn out to be one of his biggest assets as he would need all the endurance and stamina to turn this ship around.