[7] However, following the financial crisis of 2007–2008, Rajan's views came to be seen as prescient, and he was extensively interviewed for the Academy Awards-winning documentary Inside Job (2010).

In 1968, he joined the newly created external intelligence unit, the Research and Analysis Wing (R&AW) where he served as staff officer under R. N. Kao and became part of the "Kaoboys".

The nature of financial systems had witnessed widespread changes in the 1980s, with markets getting deregulated, information becoming more widely available and easier to process, and competition having increased.

The book argued that entrenched incumbents in closed financial markets stifle competition and reforms, thereby inhibiting economic growth.

He argued that widening income inequality in the US, trade imbalances in the global economy, and the clash between arm's length financial systems, were responsible for bringing about the crisis.

The Research Papers in Economics project ranks him among the world's most influential economists, featuring him among the top 5% of authors.

Critics, including Nobel laureate and former chief economist at the World Bank, Joseph Stiglitz, held the IMF's policies responsible for increased economic volatility and destabilisation.

[12][30] While the role of the chief economist had previously always been held by a leading macroeconomist, the IMF wanted to strengthen its financial expertise.

American economist Anne Krueger, then the IMF's first deputy managing director, had recently read Rajan's book Saving Capitalism from the Capitalists, and reached out to him to understand if he would be interested.

Although Rajan seemed to harbour reservations initially, reportedly telling her, "Well, Anne, I don't know any macroeconomics", he appeared for an interview, and was subsequently appointed.

[22] During his tenure the Research Department, which Rajan led, contributed to a complete review of the IMF's medium-term strategy, worked on introducing modern modelling and exchange rate assessment techniques to the IMF's consultations with member countries, and analysed the growth and integration of China and India into the world economy.

A High Level Committee on Financial Sector Reforms was constituted consisting of twelve members, with Rajan as chairman.

[37][12] On 10 August 2012 Rajan was appointed as chief economic adviser to India's Ministry of Finance, succeeding Kaushik Basu in the role.

[39] In the annual survey, he urged the government to reduce spending and subsidies, and recommended the redirection of Indians from agriculture to service and skilled manufacturing sector.

[43] Under Rajan, the RBI adopted consumer price index (CPI) as the key indicator of inflation, which is the global norm, despite the government recommending otherwise.

[50] In May 2016, in a letter to Prime Minister Narendra Modi, Rajya Sabha MP Subramanian Swamy leveled several allegations against Rajan.

He also claimed that Rajan has been sending confidential and sensitive financial information using his University of Chicago unsecured personal email address.

[55] In September 2017, Rajan revealed that though he was willing to take an extension and serve a second term as RBI Governor, the government had not extended any offer to him which left him with no choice but to return to the University of Chicago.

"[66] Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time.

[67] However, following the financial crisis of 2007–2008, Rajan's views came to be seen as prescient; by January 2009, The Wall Street Journal proclaimed that now, "few are dismissing his ideas.

"[66] In fact, Rajan was extensively interviewed on the global crisis for the Academy Award-winning documentary film Inside Job.

Rajan wrote in May 2012 that the causes of the ongoing economic crisis in the US and Europe in the 2008–2012 period were substantially due to workforce competitiveness issues in the globalisation era, which politicians attempted to "paper-over" with easy credit.

He proposed supply-side solutions of a long-term structural or national competitiveness nature: "The industrial countries should treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades... Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies.

In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track.

In southern Europe, by contrast, it means removing the regulations that protect firms and workers from competition and shrinking the government's presence in a number of areas, in the process eliminating unnecessary, unproductive jobs.

[69][70][71] In an article in Foreign Affairs magazine, Rajan advocated structural or supply-side reforms to improve competitiveness of the workforce to better adapt to globalisation, while also supporting fiscal austerity measures (E.g., raising taxes and cutting spending), although he conceded that austerity could slow economies in the short-run and cause significant "pain" for certain constituencies.

Instead he advocated traditional Keynesian fiscal (government spending and investment) and monetary stimulus, arguing that the primary factor slowing the developed economies at that time was a general shortfall in demand across all sectors of the economy, not structural or supply-side factors that affected particular sectors.

[73] As far as his position on India is concerned, Rajan stayed away from the Bhagwati vs. Sen debate, and has tended to sympathize with both sides of the so-called "growth vs. welfare" argument.