On Saturday, RBI Governor Raghuram Rajan announced that he would not be coming back for a second term and would return to the University of Chicago to resume his career in academia. Rajan has always been an outspoken governor and, throughout his three-year-long tenure, has been unafraid to voice his opinions. On June 7, when asked if he would return, he had repartee offer, "It would be cruel of me to spoil the fun the press is having."
However, despite the many successes of his tenure, there were those who criticised his policy decisions with Subramanian Swamy being at the top of the list. In 2013, in Rajan's first speech since he assumed office, he had already foreseen what was to come (video above). "Any entrant to the central bank governorship probably starts at the height of their popularity. Some of the actions I take will not be popular. The governorship of the Central Bank is not meant to win one votes or Facebook "likes". But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism."
But this foresight isn't something out of the ordinary. In 2005, Raghuram Rajan had pointed to the possibility of a financial crash, which did take place in 2008, in his paper titled "Has Financial Development Made the World Riskier?". Much like Swamy criticised him over the last few years, the former US Treasury Secretary termed his views "misguided" and called Rajan a "luddite". Until, unfortunately for them, Rajan's predictions came true.
In 2008, Rajan presented the idea of financial catastrophe insurance for large corporations, Finnish central-bank governor Erkki Liikanen, remembering the 2005 conference said, "I don't dare criticise you. That is all."
Below is an excerpt from the acclaimed 2010 documentary Inside Job, where he speaks about the financial crisis.
Earlier in 2016, he spoke at the convocation ceremony of the National Institute of Bank Management, where he spoke about, amongst other things, his comment about India: "In the land of the blind, the one-eyed man is king.
"My intent was to signal that our outperformance was accentuated because world growth was weak, but we in India were still hungry for more growth. I then explained that we were not yet at our potential, though we were at a cusp of a substantial pick-up in growth given all the reforms that were underway. In our news-hungry country, however, our domestic papers headlined the phrase I used. To be fair, they also offered the surrounding context, but few read beyond the headline. So the interview became moderately controversial, with the implication that I was denigrating our success rather than emphasising the need to do more."
In January, at the fourth CD Deshmukh Memorial, Rajan explained his idea of Dosa economics, how inflation and not interest rates are a silent killer and elaborated on why India's aggressive pursuit of growth might not be such a good idea, citing the example of the crash of Brazil's economy.
At the Shiv Nadar University convocation, Rajan for most of his talk analysed Harvard philosopher Michael Sandel's book What Money Can't buy: The Moral Limits of Markets, where he writes about the range of things money can and cannot buy and if should be banned altogether.
Rajan disagreed, "What he also seems to ignore are the virtues of anonymity. In a free market, all it takes to buy what you want is money. You do not need a pedigree, a great family history, the right table manners, or the right fashionable clothing or looks. It is because money has no odour, because it is the great equaliser, that so many people across history have been able to acquire resources and invested them to make the world we live in."
Rajan probably didn't mind Swamy's over the top comments or the criticism from business leaders and politicians. At one point in his talk, he said, "What can you take away from all this? First, that it helps to question everything, including my interpretation of Sandel, for only with questioning comes clarity." Unfortunately the clarity it brought about is that Rajan was good for India and he is out. Swamy? He is in the Rajya Sabha.