INDIA is undergoing a ‘Rexit’ de bate as the central bank gover nor has put in his papers. Raghuram Rajan, however, will long be remembered as he is leaving behind a mixed bag of successes and half-successes. His strategy to hire fresh talent from the open market for more policy research was shot down by the inherent bureaucracy, though. But his achievements are overwhelming. Three of his fundamental objectives to bring down inflation, bolster foreign exchange reserves and widen the network of banks have met with huge success.
Often dubbed as ‘inflation warrior’, the Reserve Bank of India governor successfully arrested inflation and brought it down to 5.2 per cent in April 2016, from a staggering double digit when he assumed office in 2013. His legacy is that he hiked interest rates and changed the metric by which inflation is determined. It was an approach more commonly known as moving from wholesale to consumer targeting. Likewise, under his tenure, foreign exchange reserves rose from $249 billion to $359 billion. One of the many regrets Rajan will have is that he was unable to act against large corporate defaulters considered as parasites in the system. As the government readies to name his successor, there are fears that there will be a mass exodus of foreign portfolio investments. The rationale is that the young RBI governor brought with him a sense of global credibility, which his successor may not be able to retain. Rajan’s decision to bow out has evoked strong reactions. Congress leader Rahul Gandhi took a shot at the Centre saying Rajan’s exit will be a loss to Indian economy. He praised the governor for steering the economy in difficult times. This has put Finance Minister Arun Jaitley in a fix, who contended by admitting that Rajan’s good work is appreciated. Undoubtedly, he has been an extraordinary manager, as he leaves a legacy of economic stability. Prime Minister Narendra Modi, however, believes that it’s an administrative issue, which can be better addressed in Sept. But the point is that a firm word from govt asking him to continue will usher in a new era of confidence and stability. ‘Rextension’ must replace ‘Rexit’. Rajan has walked the talk. — Khaleej Times