The youngest ever Governor of the Reserve bank of India, Raghuram Rajan takes over what is arguably the country’s most significant financial position with the most impeccable credentials. The man who foresaw the global financial meltdown well before anyone else, and spoke about it in the face of much vilification, now has the economic hopes of a nation of 1.2 billion people resting on his shoulders. The question in everyone’s mind is not whether he has the credentials and experience required to do the job effectively. But, will he be able to manage the many contradicting priorities that he will have to juggle to do so?
The author believes that success or failure for Mr.Rajan will be determined not by his knowledge and skills as an economist, but by his abilities as a leader to recognise, prioritise and meet the needs of his many varied constituents, all of whose interests will have to be served to get India back on the path to economic prosperity.
Mr.Rajan takes over at a time when the ‘India Story’, which has kept business sentiment high over the last decade, is losing its sheen. A significantly declining economic growth rate coupled with embarrassing policy flip flops have made India lose its position as a preferred destination for foreign investors which will add to our Forex woes. In fact, it is not just the Foreign investors who are losing confidence, but there are many impediments to local businesses activity in the form of archaic and outdated labour, land reform and other laws, that act as impediments.
Runaway inflation, a tightening job market and unpopular government policy has eroded the confidence of the common man.
With elections around the corner and a sluggish economy, business sentiment is low.
But all the above themes have been done to death in the pink pages. And there are other agendas that will need his attention that may not be as much spoken about hitherto.
So what will it take for Mr.Rajan to succeed?
To begin with Mr.Rajan would have to be a charismatic leader. He comes into the RBI form the “outside” and for him to be successful in terms of actual implementation of policy and initiatives he needs get the entire RBI machinery behind him. Not an easy task, given the inherently conservative and often puritanical culture of the institution. In the short time available to him during his term, it would take an extremely charismatic leader to infuse energy and loyalty into the vast and complex organisation that the RBI, to drive execution in a manner that is fast and efficient.
Mr.Rajan also takes over at a time when one of the big questions on the lips of India Inc. is ‘KaunBanega Banker?’ The success or failure of RBIs much touted agenda of financial inclusion for the financially weak sections of society will depend on not only who gets the licenses, but also the policies that govern the new Banks, and for that matter the old ones as well. It will take immense pragmatism, foresight and courage to do what is right by the country on this delicate issue where the interests of Big business, the common man, the ‘neta’ and the poorest sections of society all may be conflicting. In fact, the whole financial sector has faced a seeming meltdown over the last few years, not only because of global factors abut also on account of many disconnected and sometimes conflicting internal policies. A known advocate for extending the reforms agenda started by the government in 1991, Mr.Rajan would need to focus on reforming the whole Financial sector and move the RBI away from being a mere “ regulator’ of this sector to being a ‘facilitator’ and ‘developer’ for this sector.
At a time when elections are looming, the economy is struggling and inflation, particularly food inflation, is roaring, the temptation for the political masters of the country to indulge in populist but economically unsound practices is high. At a time like this the role of the Governor of the RBI morphs from being that of a regulator, to actually becoming a major influencer of economic policy. There has been enough public display of these pushes and pulls in the recent past. Mr.Rajan will need to have determination and political savviness required to tread these fine lines wisely.
In the overall scheme of things, the role of the RBI today can be much more powerful than being a regulator that manages some aspects of the economy financial market interventions. The RBI needs to elevate itself to be a strong influencer of the Government for putting in place sound economic policies, that help unlock the rich promise of India. The reputation and goodwill that Mr.Rajan enjoys both globally and in the corridors of power in India will help him do this.
What I have talked about in this article are really all about the higher order leadership competencies of pragmatism, courage, judgement, influence Global acumen and personal power. Mr.Rajan will need to display all of these is great measure in the days to come. This is what I believe will make the difference between a lack lustre tenure to one that is remembered in the years to come as one that helped turn around an ailing Indian economy.
In conclusion one would have to say that Mr Rajan is much like a star of the circus that is India. He will have to be the trapeze artist performing without a net because the risks are high, but the rewards of success – a resurgent and sound Indian economy that embraces all of our teeming billions – are surely well worth them as well. He will have to be a master juggler to balance the varied needs of different sections. And most of all he will have to be like the Ringmaster, moving seamlessly between many different situations and scenarios and displaying the right behaviours at the right time.
We wish Mr.Rajan very well indeed.