Raghuram Rajan

Raghuram Rajan was born on 3 February 1963 in Bhopal, Madhya Pradesh into a Tamil family.

Assigned to the Intelligence Bureau, R Govindarajan, his father, was posted to Indonesia in 1966. In 1968 he joined the newly created external intelligence unit of the Intelligence Bureau, the Research and Analysis Wing (R&AW) 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 Raghuram Rajan missed school one year because of political turmoil. After Sri Lanka, R Govindarajan was posted to Belgium where the children attended a French school. In 1974 the family returned to India. 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.

Rajan's elder brother works for a solar company in the United States. Rajan's sister is married to an Indian Administrative Service officer and is a French teacher in New Delhi. Rajan's younger brother, Mukund Rajan, was born in Chennai in 1968. He was the Brand Custodian and Chief Ethics Officer of Tata Sons

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 Master of Business Administration 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.

Rajan is a vegetarian. He likes the outdoors and plays tennis and squash. He enjoys reading Tolstoy, J. R. R. Tolkien and Upamanyu Chatterjee. Rajan appeared on Siddharth Basu's quiz show Quiz Time, telecasted on the national television channel Doordarshan, in 1985, teaming up with his batchmate Jayant Sinha to represent IIT Delhi. He has also participated in various marathons, such as the Standard Chartered Mumbai Marathon 2015.

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.

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-time 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.

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 financial crisis of 2007–2008. 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.

In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."

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.

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.

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 Université catholique de Louvain in 2019 .

The response to Rajan's paper at the time was negative. For example, former U.S. Treasury Secretary and former Harvard President Lawrence Summers called the warnings "misguided" and Rajan himself a "luddite". However, following the financial crisis of 2007–2008, Rajan's views came to be seen as prescient; by January 2009, The Wall Street Journal proclaimed that now, "few are dismissing his ideas." In fact, Rajan was extensively interviewed on the global crisis for the Academy Award-winning documentary film Inside Job. Rajan wrote in May 2012 that the causes of the ongoing economic crisis in the US and Europe in the 2008–2012 period were substantially due to workforce competitiveness issues in the globalisation era, which politicians attempted to "paper-over" with easy credit. He proposed supply-side solutions of a long-term structural or national competitiveness nature: "The industrial countries should treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades... Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies. In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track. In southern Europe, by contrast, it means removing the regulations that protect firms and workers from competition and shrinking the government's presence in a number of areas, in the process eliminating unnecessary, unproductive jobs."

During May 2012, Rajan and Paul Krugman expressed differing views on how to reinvigorate the economies in the US and Europe, with Krugman mentioning Rajan by name in an opinion editorial. This debate occurred against the backdrop of a significant "austerity vs stimulus" debate occurring at the time, with some economists arguing one side or the other or a combination of both strategies. In an article in Foreign Affairs magazine, Rajan advocated structural or supply-side reforms to improve competitiveness of the workforce to better adapt to globalisation, while also supporting fiscal austerity measures (E.g., raising taxes and cutting spending), although he conceded that austerity could slow economies in the short-run and cause significant "pain" for certain constituencies. Krugman rejected this focus on structural reforms combined with fiscal austerity. Instead he advocated traditional Keynesian fiscal (government spending and investment) and monetary stimulus, arguing that the primary factor slowing the developed economies at that time was a general shortfall in demand across all sectors of the economy, not structural or supply-side factors that affected particular sectors.

On 6 August 2013 it was announced that Rajan would take over as the Governor of the Reserve Bank of India for a term of 3 years, succeeding Duvvuri Subbarao. On 5 September 2013 he took charge as the 23rd governor, at which point he took a leave of absence from the University of Chicago Booth School of Business.

In his first speech as RBI governor, Rajan promised banking reforms and eased curbs on foreign banking, following which the BSE SENSEX rose by 333 points or 1.83%. After his first day at office, the rupee rose 2.1% against the US dollar. As Governor of the RBI, Rajan made curbing inflation his primary focus, bringing down retail inflation from 9.8% in September 2013 to 3.78% in July 2015 – the lowest since the 1990s. Wholesale inflation came down from 6.1% in September 2013 to a historic low of -4.05% in July 2015.

In a 2014 interview, Rajan said his major targets as governor of the Reserve Bank of India were to lower inflation, increase savings and deepen financial markets, of which he believed reducing inflation was the most important. A panel he appointed proposed an inflation target for India of 6% for January 2016 and 4%(+-2%) thereafter. Under Rajan, the RBI adopted consumer price index (CPI) as the key indicator of inflation, which is the global norm, despite the government recommending otherwise. Foreign exchange reserves of India grew by about 30% to the tune of $380 billion in two years. Under Rajan, the RBI licensed two universal banks and approved eleven payments banks to extend banking services to the nearly two-thirds of the population who are still deprived of banking facilities.

Media reports positioned Rajan as a prospective successor to Christine Lagarde as head of the IMF when her term expired in 2016, even as Rajan himself countered such speculation. This did not eventually come to bear, as Lagarde was nominated for a second term at the end of her tenure. On 9 November 2015, Rajan was appointed as Vice-Chairman of the Bank for International Settlements (BIS).

On 18 June 2016, Rajan announced that he would not be serving a second term as RBI Governor, and planned to return to academia. In September 2017, Rajan revealed that though he was willing to take an extension and serve a second term as RBI Governor, the government had not extended any offer to him which left him with no choice but to return to the University of Chicago. He also denied claims that the University of Chicago had, at that time, refused to accept his leave of absence to continue for a second term.

In interviews in September 2017, Rajan said the Government of India had consulted the Reserve Bank of India, during his Governorship, on the issue of demonetization but never asked to take a decision. He said the RBI was against the move and warned the government of the potential negative effects. Rajan also termed the currency notes ban exercise as, "One cannot in any way say it has been an economic success". In addition to his work at the University of Chicago and RBI, Raghuram is also a member of the Berggruen Institute's 21st Century Council.

In 2019, Rajan said that, following the financial crisis of 2007–2008 and the imposition of austerity, contemporary capitalism "is under serious threat" because it has stopped providing opportunities for the many and is now facing a possible revolt from the masses.

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RBI Governor Raghuram Rajan maintains status quo on his's birthday!

At the post policy press conference here today, reporters wished him 'happy birthday', which he acknowledged with a smile.