Raghuram Rajan, RBI & Fault Lines

Come 4th September, Dr  Rahguram Rajan will take over the reigns of the Mint Street, Mumbai. Dr Rajan, comes with illustrious career record. Since his graduation days, he spent all his life in US or abroad. Like most of the Manmohan Singh team, he comes with the World Bank and IMF baggage. He famously predicted the 2008 world crisis before they brown out. He was ridiculed (or played down) by many in the Washington establishment. However, Rajan never compromised on his views. Until tomorrow, Dr Rajan remained a backroom operator or academic. That helped him to keep his reputation intact.

Welcome to Dr Raghuram Rajan into the hot seat - at a time India's economic fault lines are obvious even for common man. At North block, New Delhi - India is suffering from intellectual ideologies or inertia. Speaking in Economic terms - no one knows, if India is Capitalism, Socialism or communism. At one end - while the free market is limping, other end subsidies and freebies are exponentially go up. The bets on Onion, Petrol and dollar - which one of them would reach Rs 100 mark per unit first are not abating. While Government is aiding Petrol, market is taking care of Rupee. Even when the rain God blessed, Onion is at the mercy of some ghosts.

Current account deficit, inflated real estate, falling growth, raising inflation, policy paralysis, lack of vision at New Delhi, black money, corruption and not the least Onions are in this long list.

Now the key question though is - what Dr Raghurajan can do? Last two RBI governors - YV Reddy and Duvvuri Subbarao struck to their guns. Like US, is it that whole magic for Indian economy in tweaking interest rates and loose monetary policy (QE)? If it was that simple, why Reddy and Subbarao didn't do it, instead became anti-establishment?

Like his super boss, Dr Mannohan Singh - Raghuram Rajan is at this most defining moment of his life and career. Dr Singh failed to act. Can Raghuram Rajan act and force the policies that would clear the fault lines or fall in line with P Chidambaram? Unlike writing books or publishing articles - Rajan has to deal with the complex system in New Delhi. The biggest challenge is - who is boss? Rao and Reddy got their answer quickly and operated independently.  

With populism on raise, elections round the corner - not sure how much Raghuram Rajan can correct India's economic fault lines. Certainly, the fault lines under his chair and for his reputation are on the horizon for now.

Good luck to first ever (American?) Indian RBI Governor.