(Image source from: Rockstar Rajan's balloon loses air)

India's newest Rockstar, Raghuram Rajan, had a lot going for him when he was appointed as the successor to D Subbarao as RBI's chief. India wanted a 'hatke' solution to a 'regular' problem. Yes, India's problems belong to every household, but they multiplied too quickly. Rajan was expected to make RBI a multi-tasker, just like any hardworking Indian housewife.

On the day of his very first monetary policy, the RBI Governor insisted he wanted to check India's worrisome inflation. “Of course, we are anti-inflation. Of course, our intent is to signal a stance against inflation,” Dr. Rajan noted at the press conference following his first policy review. What, then, caused the stock markets to crash?

With immediate effect, he increased interest rate by 25 basis points to 7.50%. “We have to be very careful about immediately associating our repo rate hike to growth implications. Sometimes, the knowledge that inflation will be lower can actually enhance growth prospects rather than reduce growth prospects,” Rajan commented.

Speaking on clubbing repo hike with a substantial reduction in the MSF by 100 basis points, he added, “Analysts, when they look at this, should weigh the measures together rather than seeing it as a unilateral issue.”

That's what happened to make the balloon lose its air. Raghuram Rajan did manage to surprise all, though not favorably. Media's rockstar Economist has a long journey ahead of him to save India from its current Rupee problems.

AW: Sruthi