It’s number three on the list now of exits that world can’t stop talking about, behind the two exits that Britain managed from one kind of Euro or the other, but it still is big news here in India: Is Raghuram Rajan leaving the RBI in September the end of civilization as we know it?
Short answer: no.
Having never met Mr. Rajan, we can’t be sure about this, but we’d bet on he being horrified at the very idea of any single person (including himself) being the sole reason behind an institution’s efficient functioning. The Reserve Bank of India is the apex body when it comes to monetary policy in India, and has been ably served by many individuals in the past and the present, and that is only likely to continue in the future. So no, he leaving the RBI is not the end of civilization as we know it. It’ll be kind of like MS Dhoni leaving the Indian cricket team. Not great news, but not a disaster either.
On the other hand (I love counting the number of times we economists use that phrase. You should try it sometime – fun game), that does not mean that Raghuram Rajan leaving the RBI is good news. Especially if there is some truth to the rumour that he had to go because he was not afraid to speak his mind. He, and anybody else, ought to be judged for what they do in their job, and anybody who argues that Mr. Rajan was not good at his job is also likely to think that Grand Masti is good wholesome cinema.
On the parameter of doing his job well, Mr. Rajan excelled himself.
He was appointed to tame the beast called inflation, and he has managed that in style. This is not the place to go into the details, but whatever steps he took clearly worked. And as he himself mentioned in his statement regarding his decision to not continue as RBI governor, he would have liked to finish working on the agendas he had initiated. From that perspective, he not being around to see the job through is bad news for both the RBI and for India.
But it’s not as if we don’t have other people eminently capable of doing the job of being the Governor of the RBI.
To go back to the MS Dhoni analogy, sure he can’t be replaced, and it’ll be a sad day when he hangs up his boots. The new keeper (and the new captain) will take a while to kick rear ends as expertly as Dhoni used to, but they have the ability.
And that’s our point: it’s bad news, but it ain’t the end of the world.