The last change of guard at RBI took place on September 4, 2013, at a time when there was a crisis-like situation on the external front. With Raghuram Rajan taking over as Governor, there was a fresh set of expectations—some irrational, as one followed the speech made that evening. The speech was, in a way, an agenda to accomplish. Quite naturally, when one has to evaluate the course taken by the central bank, this would be the reference template.
The significant part of the path followed has been one of continuity. The difference has been the pace. Most of the points stressed by the Governor have been on the to-do list of RBI earlier and have been reiterated in various policies, but the change really brought about was that the approach has been action-oriented, with committees being set up, policy papers being put up for discussion and notifications being issued. In a way just like the Modi government, RBI has been nimble-footed in getting things done based on a time-line.
Four major achievements are noteworthy. First, there was a frontal counterattack on currency depreciation, and while the path followed all through was defensive in terms of controlling the outflow of dollars and using the LAF to curb speculative activity, Governor Rajan brought in the swap facility to get over $30 billion. This was unique because while there was discussion on the issuing of a sovereign bond, this move got in the dollars that were required without the government entering the market either directly or indirectly.
The second was on the monetary policy front. The market expected him to lower rates to propel growth. This is where Governor Rajan did not deviate and showed continuity in policy. He continued the aggressive stance on inflation and went ahead and had an expert committee lay the path of inflation targeting. We now have inflation targets set through the CPI, and while one can still contest this stance, it does surely lay to rest any uncertainty. What the committee has done is to lay down the rules of the game, and the market has accepted it. Curiously, the same stance taken by his predecessor had come in for vitriolic criticism from industry and critics. Therefore, this achievement is commendable. In fact, the FM is also on the same wavelength now.
Third, there has been a lot of talk on inclusive banking. Keeping in line with