Raghuram Govind Rajan by

About My Life

vivian_zhang1 — 2017-06-02 13:41:10 UTC

I was born in February 3, 1963 at Bhopal, Madhya Pradesh in India as the third child of the family. In 1981, I enrolled at the Indian Institute of Technology for electrical engineering. I then went to study at Indian Institute of Management (IIM) in Ahmedabad, and completed my Post-Graduate Diploma in Business Administration with distinction in 1987. I then earned my Ph.D. overseas at MIT Sloan School of Management where I wrote my thesis on “Essays on Banking” to receive a doctoral degree in Management in 1991. I met my wife when we were both attending IIM Ahmedabad. We now have two beautiful children; a girl and a boy.

After serving as professor in various economic and management schools, I was appointed as an honorary economic advisor by India's Prime Minister Dr. Manmohan Singh in 2008. From 2003 - 2007, I was the Chief Economist at the International Monetary Fund (IMF), the youngest person to ever hold the position. I became the governor of the Reserve Bank of India (RBI) from 2013 - 2016, during which I brought down inflation to the lowest it had been the 1990s. During my rather liberal term, India's foreign exchange reserves grew by about 30%, or $380 billion.

Who Influenced Me

vivian_zhang1 — 2017-06-02 13:55:07 UTC

When I was young, I was interested in math, so my friend introduced me to econometrics. My interest in math and economics deepened when I read Isaac Asimov's Foundation science-fiction series. My other inspiration to pursue a career in economics was John Maynard Keynes. When I first read his Keynes' works, I was completely in awe. I respected the way his ideas of the Bretten Woods system of monetary management and the Keynesian approach in controlling the business cycle were so influential I was completely inspired by his ability to use his economical skill and knowledge to change the way people and society think. Ever since then, I strived to be like him.

While writing my thesis in order to earn my PHD in MIT Sloan School of Management, my major research interests were on banking, economic development, and corporate finance.

Notable Works and Publications

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vivian_zhang1 — 2017-06-02 14:18:25 UTC

"Saving Capitalism from the Capitalists"

vivian_zhang1 — 2017-06-02 14:26:07 UTC

I co-authored Saving Capitalism from the Capitalists with Luigi Zingales in 2003. In this novel, I argued in favor of deregulated financial markets as a way to make finance more accessible to the poor: “Capitalism, or more precisely, the free market system, is the most effective way to organise production and distribution … healthy and competitive financial markets are an extraordinarily effective tool in spreading opportunity and fighting poverty. …Without vibrant, innovative financial markets, economies would ossify and decline.”

"Fault Lines: How Hidden Fractures Still Threaten the World Economy"

vivian_zhang1 — 2017-06-02 14:27:05 UTC

My book, Fault Lines: How Hidden Fractures Still Threaten the World Economy, won the Financial Times/Goldman Sachs Business Book of the Year award in 2010. In my book, I argue how a few flaws in the economy can lead to an even bigger crisis than the global financial crisis - which I also predicted to happen. Often times, the situation of an economy is blamed by the choices made by the banks, government, and households; however, the choices made by these groups are only rational responses to the flawed global financial order. The flaw is that the world is overly dependent on American consumers to cause economic growth and prevent downturns in the economy. Because of this dependency, the American economy can impact the global economy. This is an issue because, as I argued and explored in my book, due to the unequal access to education and and health care in the US, this will eventually cause the the world to experience financial peril. Therefore, in order to prevent this and achieve long term prosperity, we must make some difficult changes in the choices we make.

Major Ideas

vivian_zhang1 — 2017-06-02 14:27:42 UTC

Interesting Facts

vivian_zhang1 — 2017-06-02 14:34:10 UTC

I am a vegetarian, and I love spending time outdoors, and playing tennis and squash. My favorite authors are Tolstoy, J. R. R. Tolkien, and Upamanyu Chatterjee. I am what they call an avid quizer, and eventually appeared on national TV with some friends back in the 80's because of it. I also attended a various marathons.

Influence on Economics

vivian_zhang1 — 2017-06-02 14:38:18 UTC

I predicted that the US would experience an economic turmoil; however, many didn't believe me, and I was ridiculed for my ideas. When the US, then Europe, went into economic crisis during the period 2008 to 2012, people began to respect and view me as one of the greatest economists of our times. Though I've retired from my position as governor of the Reserve Bank of India, I am still called the "James Bond" of the Indian economy, because I brought it back from the edge of the cliff.

Bibliography

vivian_zhang1 — 2017-06-02 14:55:45 UTC

^{• "Raghuram Rajan."}^Wikipedia^{. Wikimedia Foundation, 25 May 2017. Web. 10 June 2017. .

• Editors @ TheFamousPeople.com. "Raghuram Rajan Is The Bond Of Mint Street And Here's All That You Need To Know About Him."}^{Childhood, Life Achievements & Timeline}^{. N.p., 5 Sept. 2016. Web. 10 June 2017. .

• Gupte, Masoom. "Guess Who Inspired Raghuram Rajan to Become an Economist?"}^{The Economic Times}^{. Economic Times, 14 Feb. 2017. Web. 10 June 2017. .}

^{• Rajan, Raghuram. "Full Text: Raghuram Rajan on Dosa Economics – Financial Reforms and Perils of Debt-driven Growth."}^Scroll.in^{. Https://scroll.in, 03 Jan. 2017. Web. 10 June 2017. .

• Raghuram Rajan Raghuram Rajan Is a Former Governor of the Reserve Bank of India. "Is Inequality Inhibiting Growth?"}^{Project Syndicate}^{. N.p., 10 July 2012. Web. 10 June 2017. .

• "9 Things You Didn't Know about Ex-RBI Governor Raghuram Rajan, the 'James Bond' of the Indian Economy."}^{YourStory.com}^{. N.p., 02 Feb. 2017. Web. 10 June 2017. .

• "Rajan, R.G.: Fault Lines: How Hidden Fractures Still Threaten the World Economy. (eBook and Paperback)."}^{Princeton University}^{. The Trustees of Princeton University, 20 Apr. 2017. Web. 10 June 2017. .}

"Dosanomics Theory" on Inflation

catherine_gong — 2017-06-03 10:19:03 UTC

I used the analogy of "dosa economics" - dosas being a type of popular Indian pancake - to illustrate how inflation is a killer of economic growth. The theory is simple: At the start of the year, dosas cost ₹50 each. If a man has ₹1000,000, he could buy 2,000 dosas, but he wants more by investing. At a 10% interest rate and 10% inflation rate, he gets ₹10,000 in interest, and the price of the dosas increases through inflation to ₹55. He can buy 182 dosas with just the interest.

If both the interest and inflation rates were lower – say, 8% and 5.5% respectively – then he gets ₹8,000 in interest, and the price of the dosa is at a comparatively lower ₹52.75. Now, he can only buy 152 dosas with the interest, which is less than in the first scenario, which seems worse. However, he gets his principal deposit back also. In the high inflation period, it was worth 1,818 dosas, and in the low inflation period, it is worth 1,896 dosas. So at 10% inflation, his principal and interest are worth 2,000 dosas together, while at 8% inflation they are worth 2,048 dosas. He is better off in the low inflation period in terms of dosas. Therefore, this shows inflation is a "silent killer" because it eats into pensioners' principal deposits, while they are misguided by high nominal interest rates into believing that they are getting an adequate return. Lower inflation rates, even if they come with lower interest rates, are more beneficial to the economy.

catherine_gong — 2017-06-03 12:06:46 UTC

catherine_gong — 2017-06-03 12:07:07 UTC

catherine_gong — 2017-06-03 12:13:01 UTC

Dosas

My Opinion on Free Markets & Government

catherine_gong — 2017-06-03 12:17:57 UTC

The free market is the form of economy that is most beneficial to human society and the individuals within it. Free markets flourish only when government plays a role in setting laws and providing support; however, government is also subject to influence by groups with private interests.

Therefore, while government is necessary because it balances the deficiencies of free capitalist markets, it should ideally play a small role. A free, competitive market system with no trade barriers is the most effective way to organize production and distribution, and spread opportunity and fight poverty.

Paul Krugman Comment

charlesoccer1999 — 2017-06-11 13:49:07 UTC

Hello Mr. Rajan,

It was interesting to read about your Dosaeconomics theory on inflation–this humorous approach to serious economics reminds me of my own joke paper that I wrote as a graduate student titled "The Theory of Interstellar Trade". I think that we both may agree upon the idea that it is supposedly amusing ideas such as these that pique a general audience's interest in economics.

Anyways, I would like to question your stance on the idea that pensioners are misguided by the idea of high nominal interest rates into believing that they are receiving an adequate return. If a government were to aim for these lower inflation rates at the cost of lower interest rates, it would upset voters, as they would most likely believe that they are getting a worse return. Thus, there is political incentive for governments to not enact upon this. If Central Banks were to do this, governments would just find a way to counteract the the Central Bank.

What do you think should be done?
Best,
Krugman

A Great Economist's Comment

michaeltsencw — 2017-06-11 18:58:22 UTC

Dear Mr. Rajan,

I am very fascinated by your "Dosanomics Theory" on Inflation. It is a simple and easy way for many people to understand economics in a fun way. It allows readers to truly connect economics with their daily lives, which I believe is extremely essential in educating the public about economics. Many people may not have fully understood what inflation can truly do without this explanation. I have come to understand that you also have another nickname: Mr. Free Market. That's what I like to hear and see! I am a strong advocator for free market, and I believe is the most effective way to organize production and distribution and create healthy competition. If the free market system is done correctly in a developing country such as India, it will be extremely helpful in allowing the country to flourish and expand very quickly. The economy will be boosted incredibly. For your stance on fiscal policy, I am a bit concerned. I understand you believe in both fiscal and monetary policy. I personally believe that monetary policy is much more effective and better to stimulate the economy. I want to see your stance in what would happen if India had an effective free market. I also want to ask, if you believe that government should have very little influence on the market, why do you also still support the use of fiscal austerity measures at all?

Kind Regards,
Milton Friedman

The Greatest Economist's Comment

britt_rogers — 2017-06-12 02:55:19 UTC

Hello Mr. Rajan!

First of all, I would like to say that I am very happy for you and your amazing accomplishment of being the youngest Cheif of the IMF ever! I'm not sure that you know this, but I'm actually the first female chair of the Fed, and it makes me so happy to see people like us breaking the status quo! However, I have to disagree with your theory of dosanomics, as I expressed to you in a response posted on my page. I understand that you believe that inflation is a "silent killer" and that low inflation is the best inflation, but I have to disagree with you on that, as I believe that occasionally letting inflation run high for a small period of time can be beneficial to the economy. As I've said before, an easy interest-rate stance could have costs that exceed the benefits by increasing the risk of financial instability or undermining price stability. I understand that my perspective is not perfect and so I've called for more study on how the Fed could influence expectations of future interest rates and inflation, in order to grasp and an even deeper understanding of inflation. Thank you for taking the time to read this and I hope that we can discuss this more in the future.

Best,
Janet

Friedrich Hayek

joyhoisosm — 2017-06-12 03:13:43 UTC

Greetings Mr. Rajan,

It is great to see someone that also advocates for the free market. There really aren't many that support the ideas I do. I completely agree that a free market is the most beneficial to an economy. I also believe that the government should only implement some basic policies to keep the economy functioning, but when it comes to everything else, the free market is the way to go. I also agree with you when it comes to your view on inflation rates. I believe inflation causes debt, increased difficulty in ascertaining real costs and profits, higher unemployment in the long run, even more government control, and recessions as well as depressions. I am eager to see how your career as an economist continues. Best, Hayek.