Raghuram Rajan will present his final monetary policy today. He will step down as Reserve Bank of India (RBI) governor early next month. Most of the attention right now is on whether he will cut interest rates one last time. The consensus is that he will not.
Rajan took over at a time when the rupee was under attack, inflation had been close to double digits for several years, the first cracks in the banking system were evident to those who were looking and RBI’s credibility had been dented. Much has improved since then and Rajan deserves a lot of the credit for that. The asset quality of banks looks weaker today only because he forced lenders to stop hiding the problem. The other achievements have been a formal inflation target, initial steps to have a more diverse financial system and greater internationalization of the rupee.
Rajan has had more than his fair share of critics, but few will doubt that his successor has a class act to follow.