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EARLY LIFE
Raghuram Rajan was born in 1963 in Bhopal to a Tamil Indian Foreign Service officer. Schooling - Sri Lanka, Indonesia, and Belgium, and in 1974, he moved back to India from Belgium. Then he did the rest of his schooling from Delhi Public School RK Puram.
Graduation- 1985, Indian Institute of Technology, Delhi with a bachelor's degree in electrical engineering.
Post Graduatation- PGDM from the Indian Institute of Management Ahmedabad in 1987. Received PhD in Management from the MIT (Massachusetts Institute Of Technology, United States) in 1991 for his thesis titled "Essays on Banking".
Some interesting facts : Visiting professor to the World Bank and US Federal Reserve Board. One of the few economists who predicted the 2008 credit crisis. Raghuram Rajan, 50, is the second youngest governor after Manmohan Singh, who took charge when he was 10 days short of his 50th birthday. Rajan Raghu to his many friends and colleagues is rated as one of the most influential economists of his generation.
Awards and Achievements Won the Director's Gold Medal for best all-round achievement at IIT Delhi.and was also a gold medallist at IIM Ahmedabad. Fischer Black Prize by the American Finance Association in 2003. Financial Times Business Book of the Year award for How Hidden Cracks Still Threaten the World Economy in 2010.
Timeline
1963: Born in Bhopal, Madhya Pradesh. 1985: Electrical Engineering from IIT-Delhi. 1987: PG in Management from IIM, Ahmedabad. 1991: PhD in economics from the Massachusetts Institute of Technology. 1991: Started his career as an Assistant Professor at Chicago University. 1995: Became a full-fledged professor. 2003: Became the Economic Counsellor and Director of Research at the International Monetary Fund . 2003: Received the Fischer Black Prize by the American Finance Association. 2007: Got back to teaching. 2008: Chaired the Indian Government's Committee on Financial Sector reforms. 2010: Received the Financial Times Business Book of the Year award for "Fault Lines: How Hidden Cracks Still Threaten the World Economy". 2013: 23rd Governor on RBI.
The Preamble of RBI describes the basic functions of the Reserve Bank as: to regulate the issue of bank notes, keep reserves to secure monetary stability in India, and generally to operate the currency and credit system in the best interests of the country.
1.
INTRODUCTION
RBI is Indias central bank. Established on 1st April 1935 It was initially a privately owned entity which was nationalised in the year 1949 Initially headquartered in Calcutta but then shifted permanently to Bombay
2.FUNCTIONS
Bank Issue Monetary Authority Managerial of Exchange Control Issuer of Currency Banker of Banks Detection of Fake Currency
3. STRUCTURE
More and more rupee brought in our country and dollars are sold.
Rupee Appreciates
Gold Imports, hefty oils bills and decreasing exports due to global slowdown leads to higher current account deficit. Our imports are higher than exports resulting into a worsening CAD. India record a CAD of around 4.9%, depleting its Forex reserves and depreciating the rupee.
600,000 500,000 400,000 300,000 200,000 100,000 2009-10 2010-11 2011-12 2012-13 Export($M) Import($M)
The uncertainty and delay in our commitment to economic reforms, retrospective taxes, and policy paralysis within the government have created a fear in mind set of global investor resulting into decline of foreign Investment.
In 2012-13, India received FDI of $22.4bn against $ 35.1 bn in the Previous year. (38%less).
Global investors are also nervous about investing abroad in nations such as India due to the economic crisis in their respective countries.
Demand-supply gap between the dollar and the rupee leads to further devaluation
Curb on Import of non essential & unproductive products such as GOLD by imposing higher taxes. To reduce import we should bring in import substitution by supporting the domestic organizations by providing subsidy, tax benefits, grants and proper Infrastructure. Government can create a stable political and economic environment. Providing infrastructure and local support to the investors is another, admittedly more difficult avenue that can be explored in this regard. RBI can ease capital controls by increasing the FII limit on investment in government and corporate debt instruments. Clear cut structure of tax and other laws & transparent policies will also have positive impact on trade.
IMPETUS TO GROWTH
Definition Mr. Raghuram Rajan needs to give strong impetus to growth along with price stability, his immediate task will be to lift the gloom surrounding a fragile rupee. In a report on financial reforms he authored in 2007 for the Indian Government, he insisted that the RBI's focus should be on inflation, and should desist from defending the Rupee.
What Rajan s appointment as the RBI chief could do is to help improve sentiment among investors towards India For that to happen he will have to gain confidence of markets and investors by announcing a few workable and credible policy measures. Assocham President Rana Kapoor: We are sure that he would be able to tackle the current state of difficult times in the economy. We are sure, that as soon as the situation so allows, reversing interest rates downward along with taming inflation would be Dr Rajan's top priorities
BANKING SECTOR
Some past data and records-Dr. Subbarao tenure Challenges Reforms undertaken by Raghuram Rajan Impact on Banking Sector and Economy Further scope of Improvement
WHAT IS FII ?
Meaning
INFLATION
Rise in general price level of goods and services. Excessive money circulation. Demand exceeds supply. Short term causes: Wars and natural disasters.
Depreciating value of Indian rupee. WPI rising to 6.1% in August. Increasing cost of imports. Rising oil prices.
THE NEW GOVERNOR OF RBI, WHO ROSE TO FAME WHEN HE PREDICTED THE US CRISIS, HAS A LOT OF WORK TO DO IN CLEANING UP THE ECONOMIC MESS IN INDIA. HERE IS A LIST OF THINGS THAT RAGHURAM RAJAN MUST DO NOW TO RESTORE STABILITY IN THE INDIAN ECONOMY
RAGHURAM RAJAN, THE NEW GOVERNOR OF RESERVE BANK OF INDIA (RBI), FACES CHALLENGES OF ENORMOUS PROPORTIONS. THE RBI HAS BEEN CRITICISED LIKE NEVER BEFORE. MANY EXPERTS BELIEVE THAT THE CENTRAL BANK IS PRIMARILY RESPONSIBLE FOR THE ONGOING ECONOMIC WOES IN INDIA. IT ALL STARTED WITH THE OVERZEALOUS APPROACH OF THE PREVIOUS GOVERNOR, D SUBBARAO, TO CONTROL INFLATION. THIRTEEN CONSECUTIVE REPO RATE HIKES KILLED THE ABILITY OF ECONOMY TO GROW, WHILE IT FAILED TO CONTROL INFLATION AS WELL. THE FASCINATION OF CONTROLLING WHOLESALE PRICE INDEX (WPI) HAS NOT WORKED AT ALL, AS THE ENTIRE COUNTRY CONTINUES TO REEL UNDER THE NEGATIVE IMPACT OF INFLATION. AS IF ALL THIS WAS NOT ENOUGH, THE RECENT CRISIS OF THE DEPRECIATING RUPEE HAS EXPOSED THE HOLLOWNESS OF RBI MEASURES. THE NEW GOVERNOR BRINGS LOTS OF HOPE AND EXPECTATION.!!!!
governors in the past, which have faced this unique scenario called as trilemma, in which inflation along
with currency needs management of enormous proportion without throttling down growth further. It is an open secret that the Indian economy can ill-afford to have 4.4% GDP growth (the last quarter GDP growth) on a long-term basis. This is far from the projected growth of 8%-9% visualized in 12th plan
document.
The solution lies in propelling economic growth by attracting foreign investment and also ensuring that domestic growth picks up. In order to ensure that growth picks up, one key trigger is the cost of capital, which impacts investment environment.
While RBI has recently taken measures to suck liquidity out of the economy to protect the fall in the rupee, any
reversal of this can adversely impact the currency which is struggling to stay below Rs70 per dollar levels. But the growth cannot be achieved unless the liquidity is eased. It has been seen in the past that monetary policy measures do not work in controlling inflation, as there are several supply side constraints.
In order to overcome this challenge on an immediate basis, there is very little that RBI can do alone. It needs to
work in tandem with the government to ensure that measures are taken to attract foreign investment. This will be
the first step in stabilising the currency. However, measures to attract foreign investment can be achieved by easing foreign direct investment norms. While this may take time, issuing sovereign bonds would help. As India needs dollars to flow into the economy to stabilise rupee.