The Governator

Raghuram Rajan is the central banker who can do no wrong—for now

September 6, 2013
September 6, 2013

Welcomes don’t get much warmer than this—especially not for central bankers. But Raghuram Rajan, the new governor of the Reserve Bank of India, is being treated like a rock star by the media and a savior by the markets.

In his first briefing since taking office as governor on Sept. 4, Rajan announced plans to bolster the financial sector and support the rupee. None of the measures were ground-breaking, but the reaction was exuberant. The Economic Times, India’s leading financial newspaper, sketched Rajan as James Bond, replete with a sharp suit and a gun made out of rupee notes.

Rajan ET Frontpage

The Mint, widely regarded as India’s best financial daily, was more tempered in its headlines, but still carried five articles lauding Rajan’s maiden speech as governor. Leading news websites wrote that Rajan had begun with a bang, and that he was set to bowl the markets over. Respected economists awarded an A+ grade for his speech. He has already inspired a parody Twitter account called “The Governator,” and a Tumblr dedicated to pictures of his steely gaze.

The celebrity treatment began when Rajan was first appointed as governor in early August. Local newspapers called him a “rock star economist” and commented on his “photogenic appeal” and casual manner, such a contrast to the buttoned-down stiffness of Indian regulators. Even the Financial Times couldn’t resist (paywall) talking about how competitive Rajan is at squash matches, and the fact that he comes from a “family of Tamil Brahmins, a high-caste grouping noted for its austere intellectualism.”

The “Rajan Effect” has worked its magic in the markets too. In the two days since his arrival at the central bank, the rupee appreciated and the stock markets rallied, pushing the currency to a two-week high and the stock markets to their biggest weekly gain in two months.

But the former chief economist at the IMF, best known for his prescient warning in 2005 (paywall) about a possible global financial crisis, shouldn’t let the adulation go to his head. He needs only to look at his peer, Bank of England chief Mark Carney, to see how fleeting celebrity status can be. Carney was hailed as the “outstanding central banker of his generation” by the UK’s chancellor of the exchequer when he took office in July and his looks were compared to George Clooney’s. Now just two months later, his policies are being criticized by the media and the markets.

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