Raghuram Rajan
Raghuram Govind Rajan is an Indian economist and the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago's Booth School of Business. He served as the Chief Economist of the International Monetary Fund from 2003 to 2006 and the 23rd Governor of the Reserve Bank of India from 2013 to 2016. In 2015, during his tenure at the RBI, he became the Vice-Chairman of the Bank for International Settlements.
At the 2005 Federal Reserve annual Jackson Hole conference, three years before the 2008 financial crisis, Rajan warned about the growing risks in the financial system, that a financial crisis could be in the offing, and proposed policies that would reduce such risks. Former U.S. Treasury Secretary Lawrence Summers called the warnings "misguided" and Rajan himself a "luddite". However, after the 2008 financial crisis, Rajan's views came to be seen as prescient, and he was extensively interviewed for the Academy Awards-winning documentary Inside Job.
In 2003, Rajan received the inaugural Fischer Black Prize, given every two years by the American Finance Association 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 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, Madhya Pradesh, to a Tamil family, some metres from where the Gas Tragedy took place.His father, R. Govindarajan, was posted to Indonesia in 1966 due to his work with the Intelligence Bureau. In 1968, he joined the newly created external intelligence unit, the Research and Analysis Wing 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 political turmoil in the country caused Rajan to miss one year of school. His father was then posted to Belgium, where Rajan attended a French international school. The family returned to India in 1974. Throughout his childhood, Rajan presumed his father to be a diplomat since the family traveled on diplomatic passports. He was a half-term student of Campion School, Bhopal until 1974.
From 1974 to 1981 Rajan attended Delhi Public School, R. K. Puram, In 1981 he enrolled at Indian Institute of Technology, Delhi for a bachelor's degree in electrical engineering. 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 Post Graduate Diploma in Management from the Indian Institute of Management, Ahmedabad, 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 at Massachusetts Institute of Technology.
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 in 2012, the Hong Kong University of Science and Technology in 2015, and the Catholic University of Louvain in 2019.
Career
Academic career
In 1991, Rajan joined as an assistant professor of finance at the Booth School of Business at the University of Chicago, and became a full professor in 1995. He has taught as a visiting professor at Stockholm School of Economics, Kellogg School of Management, MIT Sloan School of Management, and Indian School of Business.File:Lionel Barber, Raghuram Rajan and Lloyd Blankfein.jpg|thumb|right|alt=caption|Rajan, with Lionel Barber and Lloyd Blankfein, at the FT and Goldman Sachs Business Book of the Year Award ceremony in 2010.
Rajan has written extensively on banking, corporate finance, international finance, growth and development, and organisational structures. He is a regular contributor to Project Syndicate. He has collaborated with Douglas Diamond to produce much-cited work on banks, and their interlinkages with macroeconomic phenomena. He has worked with Luigi Zingales 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 2008 financial crisis. 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.
The Research Papers in Economics 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, given biennially by the American Finance Association 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 in 2009, and served as the president of the American Finance Association in 2011. He is a member of the Group of Thirty international economic body. He has served as a founding member of the academic council of the Indian School of Business since 1998.
International Monetary Fund
After the 1997 Asian financial crisis, the International Monetary Fund was facing criticism for its imposition of fiscal austerity and tighter monetary policies on developing nations. Critics, including Nobel laureate and former chief economist at the World Bank, Joseph Stiglitz, held the IMF's policies responsible for increased economic volatility and destabilisation. While the role of the chief economist had previously always been held by a leading macroeconomist, the IMF wanted to strengthen its financial expertise. American economist Anne Krueger, 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 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, 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.
Economic Advisor to Government of India
In 2007, then Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, 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 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 to India's Ministry of Finance, succeeding Kaushik Basu 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.