#12
Who?
- Chief Economist at the International Monetary Fund (IMF) from 2003-2006
- RBI Governor from 2013-2016
- ‘James Bond’ of the Indian economy
- Finance Professor at the University of Chicago Booth School of Business
Tidbits from his personal life:
- RR was born in Bhopal into a Tamil family
- He was appointed as Chief Economic Adviser to India's Ministry of Finance for a year before he served as the RBI Governor
- RR is an active crusader of the free market system
- Due to his interest in math, he read Asimov's Foundation series after his friend told him about econometrics
- His other inspiration is John Maynard Keynes, whose work he finds extraordinary
- RR is an avid quizzer and enjoys reading the works of Tolkien, Tolstoy, and Upamanyu Chatterjee
- RR was extensively interviewed for the award-winning documentary Inside Job
- He suggests that capitalism serves as a handy tool to abate poverty and provides equal opportunity for all
- He believes that there is nothing more motivating than the drive to deliver better
What he did as the Governor of RBI:
- UPI (Unified Payments Interface) was launched to reduce the cost and time taken to make simple payments for transactions up to Rs. 1,00,000. It avoids the long-winded payment transfer procedure. All one requires is a UID (unique ID) and a mobile pin to authenticate the payment.
- Payment Banks would accept only deposits and not be involved in lending. This initiative was aimed at providing banking facilities to those deprived of them. The RBI licensed 2 universal banks and approved 11 payments banks for providing banking services.
- RR successfully managed to curb the retail inflation from 9.8% (September 2013) to 3.78% (July 2015), and Wholesale inflation from 6.1% (September 2013) to a historic low of -4.05% (July 2015).
- When RR joined office, the currency was at Rs. 70 against the US Dollar. During his tenure, he successfully managed to pull up the rupee.
- On his very first day as the Governor of RBI, he spoke about a new approach to formulating monetary policy, and in the same month also picked Deputy Governor Urjit Patel to examine the monetary policy framework, which stated the objective of maintaining inflation under 6 per cent.
- RR initiated a total restructuring of the RBI from the inside. He organized the RBI central office departments into five groups namely, Regulation and Banking Services, Operations and HR, Supervision and Risk Management, Financial Markets and Infrastructure, and Monetary Stability.
- Indian banks hold more than $110 billion of corporate stressed debt, which result in preventing fresh loans to be given, dampening a quicker economic recovery. RR focused his efforts on cleaning up the banks' balance sheets and put pending projects back on track.
Fun fact:
RR was in the running for an Economics Nobel Prize for the following reasons:
- RR, at 40, became the youngest ever Chief Economist of the IMF.
- He predicted the financial crisis of 2008 three years before the economic meltdown actually happened. He was greeted with laughter and disbelief when he highlighted unsustainable banking practices and risky financial instruments such as mortgage-backed securities and credit default swaps that could lead to economic collapse.
- RR's book Fault Lines garnered global attention to income inequality, where he warns against the reforms not addressing the stagnating middle-class earnings, which in turn played a role in the 2008 meltdown.
- His subtle handling of the rupee crisis in 2013 that helped bring back foreign investors to India. He made handing out new bank licences transparent and controversy-free, and also fought against inflation by targeting CPI (consumer price inflation) rather than WPI (wholesale price inflation), the index traditionally targeted by the RBI.
View on demonetization:
- In 2014, RR stated in a speech that demonetization was not an effective enough measure to curb black money, because to him, “clever people find ways around it.”
- In 2017, RR mentioned that the RBI was against demonetization and warned the Indian Government about its negative impact.
- RR wondered if currency notes ban would result in economic success or not.
- Some people speculate that this conflict regarding a difference of opinions in terms of the demonetization policy was the reason for his exit from the RBI Governor’s office.
A few of the awards he's won:
- Fischer Black Prize in 2003
- Awarded by the American Finance Association
- For contributions to the theory and practice of finance by an economist under the age of 40
- Financial Times and McKinsey Business Book of the Year Award in 2010
- Fault Lines: How Hidden Fractures Still Threaten the World Economy
- Deutsche Bank Prize in Financial Economics in 2013
- For his ground-breaking research, which influenced financial and macroeconomic policies globally
- Governor of the Year Award from London-based financial journal Central Banking in 2014
- Yashwantrao Chavan National Award in 2019
- For his contribution to economic development
One of his books which I'd like to read, which explores the causes of the 2008 financial crisis:
Some of my favourite RR Quotes:
"Strong government doesn't mean simply military power or an efficient intelligence apparatus. Instead, it should mean effective, fair administration - in other words, 'good governance.'"
"Central bankers have had enormous responsibilities thrust on them to compensate, essentially, for the failings of the political system. And my worry is we don't have sufficient tools to do that, but we're not willing to say it."
"How do we get more politicians to move from 'fixing' the system to reforming the system? The obvious answer is to either improve the quality of public services or reduce the public's dependence on them. Both approaches are necessary."
"Everyone may have some advice for the RBI. Some may advise, 'Cut your lending rates and raise the deposit rate.' How will a bank function? We take a medium-term view. The bank has an 80-year-old history. I don't want to destroy it for a few decisions."
"We should make sure that unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees."
"Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks."
"Democratic accountability means that governments must be popularly accepted, with citizens empowered to replace corrupt or incompetent rulers."
"If economists were to wait for careful studies before offering opinions about policy, we would never have anything timely to say."
"It is not because of the benevolence of the baker that we eat fresh bread in the morning but because of his desire to make money."
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