Raghuram Rajan: Destiny's child or beginner's luck?

The year 2013 saw one man take the entire nation by storm. No, we are not taking about movie-stars or cricketers, but Raghuram Rajan - one of the youngest governors of the Reserve Bank of India (RBI). A man who's every move, pun intended, has been watched by the markets, the media and the ministry, CNBC-TV18's Gopika Gopakumar shares details.

Call him the James Bond of banking or the Chennai Express of markets, this year's most desirable Indian could be none other than Dr Raghuram Rajan, the 23rd governor of RBI.

No other central banker in this country has ever received such an ostentatious reception on his arrival than governor Rajan. From his looks to his academic degrees, to being the oracle of the global financial crisis, markets and media have drooled over the messianic quality of this new governor. On his first day first show, governor Rajan stunned the markets by announcing a blitzkrieg of measures liberalising financial markets and banking sector. From the beginning, he made his priorities very clear.

Also Read: Never bet against RBI, it can hurt you: Rajan to traders

Raghuram Rajan, Governor, RBI said "To the existing traditions of the RBI, which will be the bedrock of our work, we will emphasise two other traditions that become important in these times: transparency and predictability."

But predictability was never governor Rajan's last name. On two occasions he took market by surprise with a 25 bps hike in the September mid-quarter review and an unexpected pause in the December review. But that, he said, was his style of policymaking.

But nobody is complaining about governor Rajan's style just yet, maybe, because he has been lucky, logical and successful with his first challenge - the rupee. Rajan opened a special window to allow banks to swap dollar deposits at below market rates. This enabled RBI to garner around USD 34 billion for the country.

Even as he arranged for flows, he removed the big dollar demand from oil companies from the market by opening a special swap window with oil marketing companies. This reduced demand for dollars by USD 300-400 million a day. The rupee that slid by 21 percent in the fifteen weeks before Rajan took over; rose 7 percent in the fifteen weeks after Rajan took over.

Rajan has since turned his attention to the next biggest challenge for RBI and for the country: loan defaults or bad loans of banks. He has released a discussion paper on early recognition of non-performing assets (NPA) and faster restructuring.

On September 4, 2013, Rajan said "Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise, nor do they have the right to use the banking system to recapitalise their failed ventures."

Whether he's destiny's child or its just beginner's luck, governor Rajan has turned out to be lucky for India so far. But the recent pause on rate hike has left the market wondering whether he is pushing his luck too much. Come January, market will get to know whether he missed an opportunity to hike rates or whether he knows the economy much better than any of us.