4 Rajan's 'resignation' letter to RBI staff, plans returning to academia

Edited excerpts from RBI Governor Raghuram Rajan's letter to the RBI staff, saying he'd be returning to academia at the end of his term: I took office in September 2013 as the 23rd RBI Governor. At that time, the currency was plunging daily, inflation was high, and growth was weak. India was then deemed one of the "Fragile Five". In my opening statement as Governor, I laid out an agenda for action... including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our forex reserves, transparent licencing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map the extent of system wide distress. By implementing these measures, I said we would build a bridge to the future, over the stormy waves produced by global financial markets.

I feel proud that we have delivered on these proposals. A new inflation-focused framework is in place that's helped halve inflation and allowed savers to earn positive real interest rates on deposits. We have cut interest rates by 150 basis points after raising them initially. This has reduced the nominal interest rate the government has to pay even while lengthening maturities it can issue - the government has been able to issue a 40-year bond for the first time. The currency stabilized, and our forex reserves are at a record high. Today, we are the fastest growing large economy in the world.

We have done far more than was laid out in the initial statement. I am an academic and I have always made it clear that my ultimate home is in the realm of ideas. The approaching end of my three-year term, and of my leave at the University of Chicago, was therefore a good time to reflect on how much we had accomplished. While all of what we laid out is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that'll set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.
While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016. I will, of course, always be available to serve my country .

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4 comments:

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  3. Rajan did honest job. Don't know if this wi have bad or good impact on Indian economy.

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