The old lady of Foreshore Road has just got a new master. He is different from the reliable, respectable, conservative, boring types that Delhi normally sends to govern the Reserve Bank. For one thing, he is young and spare. I cannot reveal his weight, but it is far below his intellectual weight. His age can be revealed: he crossed fifty in February. That is the age at which the government of India closes the doors to recruitment as joint secretary, and people begin to aspire to an additional secretaryship. Governor of Reserve Bank ranks somewhat above secretaries; a finance secretary would start dreaming, after he crosses 60, of becoming governor. The governor’s office, on the 18th floor, overlooks the Arabian Sea; it is large enough for Raghuram Rajan to practise his putt.

Rajan is the academically most accomplished governor to date. Manmohan Singh had a Cambridge PhD; but he joined government at such a tender age that he had no publications worth the name. But Rajan does not write academic articles to fatten his curriculum vitae; most of his writings take up burning issues and raise questions calling for serious thought. His earliest work goes back to the 1990s when American banks were diversifying out of traditional banking into securities trading and speculation, and asked questions about the risks that this diversification posed. The risks were amply demonstrated by the crisis of 2008. He has contributed most to financial economics. But once in a while, he has made daring forays into distant areas — for instance, into the history of emergence of property rights.

Rajan takes charge of what is perhaps India’s best run government institution. A company whose board I chair often has to get various permissions, mostly for foreign investors, from the Reserve Bank. It strongly discourages personal contacts and reminders. It also makes them unnecessary; it invariably replies within reasonable time. Its monthly bulletin has deteriorated recently; the deputy governors’ speeches it is nowadays replete with are generally eminently forgettable. Still, it is the best compendium of official statistics — and it always comes out on time.

But the Reserve Bank’s competence goes with inability to learn. This is not for lack of effort; the Reserve Bank people meet many outsiders, and fund many conferences, chairs and other intellectual activities. But its approach to policy issues is marred by extreme caution, which leads to distrust of ideas and experiments.

This is where I hope Rajan will make the greatest difference. For in my view, the Indian economy faces the worst crisis since 1991.

The balance of payments is just as bad. It will not lead to such panic as in 1991, since the Reserve Bank is sitting on nearly $300 billion in reserves; but the deflationary forces are strong, and I do not see that might counter them. Central banks are generally good at deflationary policies such as raising interest rates and restricting bank credit. The current conjuncture requires just the opposite: the economy has to be stopped from sinking into ever lower growth. That is certainly a fit challenge for Rajan, especially since he will have colleagues who want to pull in the traditional deflationary direction.

No government institution has the right ambience for an intellectual debate. The government is a hierarchical institution; even in the Reserve Bank, Rajan will find people agreeing with him overtly and working covertly against policies they disapprove of. The best way to deal with this kind of subversion is to bring out policy issues as far into the public arena as possible, to have a broad, open debate. I think Rajan is the best man to orchestrate one.

Finally, I must say that I was pleasantly surprised by Rajan’s appointment. I think that the Prime Minister and the finance minister have taken the right decision. Now we must wait to see if economic thinking in Delhi rises to the level required by the current circumstances.