Didn’t have to depend on permissions during RBI stint; was relatively autonomous, says Raghuram Rajan

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Former Reserve Bank of India (RBI) governor, Raghuram Rajan has not had any 'terrible experience' in any role in his career including the stint at the Indian central bank, the globally renowned economist said in an interview.

“I have been lucky to have not had any terrible experience in any role. I have enjoyed every role. At RBI, one of the most joyous things was that at the end of the day you felt you have moved the needle,” Rajan said.

Recalling his term at RBI, Rajan said: “You were relatively autonomous to do things on your own. You don't have to depend on permissions from elsewhere. There were a number of days when you went back home and you felt you really did something today. It is hard to beat that,” said Rajan.

Rajan, a former chief economist with the International Monetary Fund (IMF), was RBI governor between 2013 September and 2016.  Rajan embraced controversies during his tenure on account of his outspokenness on a range of issues. There was a campaign against Rajan by BJP leader Subramanian Swamy that involved personal attacks against Rajan.

During his tenure at RBI and after, Rajan has always stressed the need for operational autonomy for the RBI. After Rajan’s exit, his successor Urjit Patel engaged in a major public spat with the government on a range of issues including the central bank autonomy, dual regulation of public sector banks and transfer of RBI’s reserves to the government.

The differences worsened when Viral Acharya, one of Patel’s deputy governors at that point, made a public speech criticizing the government on RBI autonomy. In his speech, Acharya had warned of the wrath of the markets if the autonomy of a central bank was compromised. Ultimately, Patel resigned ahead of his term citing personal reasons.

Don’t put all money in markets

To a question, Rajan said retail investors need to be quite well diversified in markets as they are least informed. The best thing to do is to be reasonably well-diversified given that a lot of easy money has already been made in the market, Rajan said. “So, just for the fear of missing out, do not enter a party when it is going to end,” Rajan said.

If you close to retirement, do not put all your money into the markets. There is some probability, it may not and things may be much worse, Rajan said. “If I was relatively young, I could take some more risk, but I would not put everything in the market because I could be left empty handed if it collapses. So, diversification across sectors and instruments is important,” Rajan said.