Take a Bow Dr Rajan - The 5 Minute WrapUp by Equitymaster
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Take a Bow Dr Rajan

Jun 20, 2016

In this issue:
» How did Sensex perform since Rajan took over as Governor of RBI?
» Dear Swamy, now tell us how India will grow at 10%
» Market roundup
» ...and more!
Tanushree Banerjee, Co-Head of Research

As we write, we can almost hear Champagne bottles popping. One at Alan Greenspan's office and quite a few in India too.

Not that you care. But long-term investors in India should be worried.

Central banking no longer is what it is meant to be. But you thought India was different.

We survived the Greenspan era of reckless money printing. Your predecessors - Dr Reddy, Dr Jalan, and Dr Subbarao - did a fabulous job of keeping cheap money from flooding India. India's monetary policies reflected an old school prudence. And you thought you could carry that legacy ahead.

Given your experience in dealing with central banks, you thought it was necessary to voice your opinion. The new GDP numbers for India made no sense to you. You said so. Make in India seemed premature to you without first doing away with the red tape and archaic labour laws. You said so.

You never thought steep real estate prices were a problem of high interest rates. So you didn't hesitate to tell builders to bring down their prices first. The risk of oil and food price inflation were never out of your mind. So you never agreed to deep interest rate cuts.

Your predecessor, Governor Subbarao, was accused of raising rates 13 times during his tenure. You didn't even get close to half that number. But you were seen as an anti-Indian who didn't care about economic growth.

The bankers who lost their bonuses this year, thanks to your strict vigilance on their NPA writeoffs, have wished you good luck. They would rather have a blind central banker than one who dares to call India a one eyed king.

Promoters who feared going the way of Vijay Mallya now have nothing to worry about. It may be a long time before your successor gets on them as aggressively. And by then they would have borrowed a couple billion more.

Your predecessor Governor Subbarao earned Arvind Panagariya's criticism of being uninformed, unreasoned and unwarranted.

You had the privilege of being in the headlines every few weeks thanks to Subramanian Swamy's banter on your seemingly anti-national objectives.

The world is smirking at India, as we throw away one opportunity after the other.

Markets had hoped to see the 'Modi-fied' Dr Rajan. They thought the continuation of your tenure would keep the flame of hope alive. But the hope for critical reforms and rapid economic revival in India is dying even faster than expected. A strong RBI would have at least kept the lid on the economic imbalance.

The only institution Indian investors have never had to worry or get skeptical about is the Reserve Bank of India. With your unceremonious exit, we no longer have that luxury.

We thank you for keeping the legacy of the RBI intact. And sincerely hope that your successor does you and all of us proud.

What is your farewell message to RBI governor Dr Raghuram Rajan? Let us know your comments or share your views in the Equitymaster Club.

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03:00 Chart of the day

I remember the time when Raghuram Rajan took charge as the governor of the RBI. It was early September, 2013. The Indian economy was on shaky grounds. Inflation was raging high. We were sitting on a huge current account deficit. The Indian rupee was in a freefall against the US dollar. The forex reserves were shrinking at an alarming rate. There was panic in the stock markets.

Certainly, a very challenging time to take the office of RBI governor. From the time Dr Rajan assumed office, he recognized that inflation control had to be his prime target. And through his determined efforts to contain inflation, he brought a sense of stability to the Indian economy.

Today's chart of the day shows how the Indian stock markets have performed since Dr Rajan became RBI governor...

Sensex Since Rajan Became RBI Governor


Bharatiya Janata Party's Rajya Sabha MP Subramanian Swamy must be jubilant. For some time now, he had been vehemently crusading against the possibility of Rajan's second term as RBI governor. In his high-pitched, logic-lacking attack, Swamy claimed that Rajan was mentally not fully Indian and accused him of willfully harming India's economy. At an event last week, he went further with his tirade...

  • If India wants to see economic growth at 10%, Rajan should go back to Chicago.

Well, now that Rajan is going back to Chicago, we should now focus on the first part of Swamy's statement. With Rajan out of the way, Mr Swamy please tell us how India's economy will grow at 10%. We are curious to know. And we really hope you don't mean tweaking the GDP calculation methodology again to arrive at 10% growth.

Until Swamy presents his double-digit GDP growth plan, here are some latest ground realities that we want to bring to your attention.

As per Ficci Business Confidence Survey, India Inc appears to be wary of making fresh investments. In a survey that interviewed 120 companies across sectors, 64% respondents indicated that the demand situation remains worrisome.

While there have been signs of some green shoots in the economy, the broad-based economic revival to high growth rates still remains elusive.


After starting on a muted note, the Indian stock markets have reported a steady rise in today's trading session. The BSE Sensex was trading higher by 216 points (0.81%) at the time of writing. Information technology, telecom, capital goods and realty sector stocks were the leading gainers. Mid cap and small cap indices were also trading in the positive territory, each higher by 0.5%.

04:40 Today's investing Mantra

" There are problems with the way we count GDP, which is why we need to be careful sometimes just talking about growth. We have to be a little careful about how we count GDP because sometimes we get growth because of people moving into different areas. It is important that when they move into newer areas, they are doing something which is adding value. We do lose some, we gain some and what is the net, let us be careful about how we count that." - Dr Raghuram Rajan

This edition of The 5 Minute WrapUp is authored by Tanushree Banerjee (Research Analyst) and Ankit Shah (Research Analyst).

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47 Responses to "Take a Bow Dr Rajan"


Jun 27, 2016

In the movie Idi Amin(Uganda), Idi Amin executes his Reserve Bank Governor who tells Ugandan money as shit money while describing the economic situation of the country to the President. Now what is happening in India, certainly R3 did not make any such comments but atleast he had the guts to say what is wrong in an myopic sitiuation. Who brought that ex MP who is sweating in UK and the another who is naming others as if he is the only patriot available in the market. Did the Govt pass on the benefits of falling global oil prices to the common man? But why is this hyper activity in the media for rate cuts. Is it for the benefits of the minuscule few and that too at the cost of the senior citizens who are eking a life from interest income out their life long savings. R3ji you gave a sleepless nights to the defaulting corp orates, also now we know that those Bank CEOs who had their bonuses, due to huge profits declared without cleaning their balance sheets in the previous years had to forgo the same this year due to RBI's intervention. This is history. I wish he would continue to contribute to India by words or deeds as an Indian not like any other overseas NRIs(not really Indians).



Jun 23, 2016

Dear Dr Rajan

Hats off to u ........Continue to ignore people like Dr Swamy . Come 2019 in the next Lok Sabha election , Swamy and his ilk will be consigned to the dustbin of history .

What u did for India , no other RBI Governor did , especially on the PSU Banks NPA issue .........U will be remembered long after u are gone . The BJP govt never deserved u in the 1st place . God bless and enjoy your academic life in USA ......Thats where your heart is . Enjoy that .



Jun 23, 2016



Kannan Ramaseshan

Jun 22, 2016

Yes. Dr Rajan was in crucial time of Indian economy likely say a Doctor needed when the Patient in the Bed. Now the patient is cured and the doctor is no more required. He made remarkable things in short span of time. Hats off to him. There is no surprise in Mr.Modi and Mr.Swamy actions because both are depending of big corporate funding to run the party. We hope to get similar talented person assume the office soon.


Shoibal Chatterji

Jun 22, 2016

I rarely comment. But this time I cannot help myself. Dr Rajan I feel is bowing out without a fight. He must not do that. It will damage his image as a reformer, as a man who brought in change, as a fearless patriot. I recall an example I quote to my children - epitomized in the ad for Dixy Banyan or something... It says a true fighter is not the one who can punch the hardest. He is the one who after getting knocked down time and again rises to fight the opponent. Dr Rajan Sir we beseech you to reverse your decision. I know it is most easy for you to go back to Booth but that is not the spirit of a true fighter. You must stay on and fight the corrupt practices that are rampant in this country. If not for name or fame but for a piece of the action!!!!!


Prakash Basrur

Jun 21, 2016

After all Rajan is a strong headed Tamil Brahman with their inherent intellect ! Add to that his USA frankness in expression ! He could not have been a political lackey of either UPA or NDA ! I wonder how held the post so long in an Indian politico cultural situation of "haanji Saab" ! It might have been a suffocating time for him ! At last he is relieved of that situation and would do another PhD in "Central Banking" at his Chicago Alma Mater whereas our crony businessmen would merrily bleed our banks further ! "Asatya Meva Jayate" !

Like (2)

lalit Sivaji

Jun 21, 2016

Dear Madam,
It is the ripe time for Dr.Raghuram Rajan to go to Chicago and do his business there. I really doubt him as an american spy or agent for he always tried to put down Modi Govt. in all aspects and thro all means. Only because of Modi himself, Mr Rajan has survived in the post till now. He always want to project himself as anti govt for getting claps of the opposition. Let him go to HELL and nothing will happen to India . People like you, who are slaves of Sonia and Nehru family, who are arrogant at Modi and BJP and nationalists CRY CRY CRy for Rajan .
We neglect your writings as RUBBISH


Like (2)


Jun 21, 2016

hi tanushree
i absolutely agree with you on all counts.India,s loss will be america,s gain!No doubt we had excellent governors before especially mr.subbarao,s role during the 2008 crisis..but mr.rajan is a class apart.He has the guts to speak out his mind and take an independant stand...and moresoever he was a beacon for NRIs ready to forgo the lure of green dollars and help in the upliftment of their motherland...alas crony capitalism and nepotism has always the bane of india and Mr.Modi isn,t quite above it....it seems.
Farewell mr.rajan may god be with you....we as parents fight a losing battle with our children who want to settle abroad.Now however grudgingly i will have to give in ,as its the west which recognises talent and merit...may you prosper and teach generations of bright economists and leave indians to their miseries........

Like (1)


Jun 21, 2016

Rajan showed the grit of a Professional Financial Controller ... even though he was under political clutches of so called open minded politicians.

YOU WILL BE CALLED BACK SOON ... if not as RBI Governer ... as FINANCE MINISTER in the days to come ... to control unwanted subsidies ... free meals/groceries etc.

As a banker, you could have taken steps to improve the efficiency of bank staff. It is a service sector .. customers need friendly & service oriented bank staff.
They are least bothered about it because, probably they are getting more salary package than they deserve (for the work of 5-6 hrs a day) and perks like subsidized interest rates for loans etc., .... Instead, employ more number of casual contractors (pay 10-15 K per month or on hourly basis) than highly paid regular staff... after all every bank has good software installed and the job is reduced to "Data Operating Worker". This will reduce the unemployment problem to some extent also.

Like (1)

Dr. K. S. Ananda Kumar

Jun 21, 2016

I don't think that Rajan's exit is finalized. If our PM has any attitude of learning his mistakes at least now, we will go back and not forward in the prosperity of India. Who is Mr. S. Swamy, only a maverick politician, and I don't think what he has achieved in his political career, is nothing but sensational news. As people we must ask Mr. Modi not to allow Dr. Rajan not to leave the RBI. As you people have expressed, the PM has to respect the Institutionsd and not the individuals. Mr. Aravind Panagaria may be a great politician. But, if he keeps meddling in the institutions, he is damaging India more than helping in its prosperity. Finally,l I pray The Almighty God to save India, from such lilliputs, and give all support to people like Mr. Rajan.

Like (1)
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