Raghuram Rajan new RBI Governor
New Delhi (PTI): Chief Economic Advisor Raghuram G Rajan has been appointed as the next Governor of the Reserve Bank of India (RBI). He replaces D...
New Delhi (PTI): Chief Economic Advisor Raghuram G Rajan has been appointed as the next Governor of the Reserve Bank of India (RBI). He replaces D Subbarao, who completes his five-year term on September 4, and will be the 23rd Governor of the central bank. "Prime Minister Manmohan Singh has approved appointment of Raghuram Rajan as Governor of RBI for a term of three years," an official statement said. Rajan, a former IMF chief economist, was appointed as the Chief Economic Advisor in the finance ministry in August last year. As the new RBI chief, he will have a challenging time as he will have to battle the declining rupee, sliding growth and rising retail inflation, amid global economic uncertainty.
No magic wand in our hands
These are challenging times for the Indian economy, says RBI Governor-designate Raghuram G Rajan
New Delhi (Agencies): Reserve Bank Governor-designate Raghuram G Rajan said on Tuesday there is no magic wand to pull the country instantly out of challenges being faced by the economy.He will be the 23rd governor of the Reserve Bank and will succeed Duvvuri Subbarao who demits office on September 4.
"These are challenging times for the Indian economy. The government and the RBI are working together to address these challenges. We don't have a magic wand to make the problems disappear instantaneously. But I have absolutely no doubt, we will deal with them," he said.
After the announcement of his appointment as the new RBI governor, Rajan made a brief statement to reporters without taking any questions. Rajan, who joined as the chief economic adviser in the finance ministry is August last year, said: "I look forward to working with many dedicated employees of the RBI to continue these traditions even though I will miss my colleagues in the finance ministry". RBI, he added, is a great institution with a tradition of great integrity, independence and professionalism.
A former IMF chief economist, Rajan joins the RBI at a time when the government is battling industrial slowdown, declining rupee, rising prices and all-time high current account deficit (CAD). Known for his straight forward views on global economy, Rajan received international acclaim for predicting the 2008 global financial crisis. In 2005, Rajan had delivered a lecture severely critical of the financial sector and argued that a financial disaster might be looming.
The unlikely economist, who was honorary economic advisor to the Prime Minister earlier, is an alumni of IIM-Ahmedabad and IIT-Delhi. He had replaced Kaushik Basu as Chief Economic Advisor in the Finance Ministry last year. He did his doctorate from the Massachusetts Institute of Technology. He was professor at the University of Chicago's Booth School of Business before taking over as CEA.
Rajan was also involved with the report on Financial Sector Reforms, which was authorised by the Planning Commission.
His appointment as RBI Governor was welcomed by economic administrators and the industry. "Rajan will make an excellent Governor at the moment as he has been dealing with the problems in the last one year”, said C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC) and a former RBI Governor.
Concurring with his views, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Rajan was coming in at a tough time but he has a terrific academic and professional background. “It's a very tough time. We need someone who can give direction. The important thing is giving leadership for the next five years on how should the Indian financial system move. I think Rajan will be the best person to do that," he said. Adi Godrej, industrialist and former CII president, welcomed Rajan's appointment, saying his experience globally and as CEA in the government would stand him in good stead.
Five things that require new RBI chief’s attention
New Delhi (Agencies): Raghuram Rajan, who was named new Governor for Reserve Bank of India on Tuesday, has his task cut as Indian economy is going through challenging times. Here are five things that will require his immediate attention after he assumes charge of 23rd RBI chief on September 4 after current incumbent D Subbarao demits office.
Rajan, a former IMF chief economist, first needs to roll back the liquidity tightening measures that RBI has initiated over the past few weeks to drain liquidity in the system and increase the cost of money. This cannot be done overnight but he should have a plan on his table. After the roll back, there must be a plan to resume monetary easing, depending on the macroeconomic scenario. It’s not easy to take a call on this now, but the lowering of the interest rate is imperative to revive growth.
Even though both wholesale price inflation and core inflation are low and well within RBI’s comfort zone, retail inflation continues to be very high. That’s a big headache for RBI, and could stay the bank’s hand when it comes to easing monetary policy. Rajan needs to take care of that.
Finally, the new RBI chief needs to rebuild the market’s confidence in the banking regulator. RBI’s actions in the past few weeks and the reaction of the market have made it abundantly clear that the market has no confidence in the central bank. Rajan’s biggest task will be making the market listen to the regulator.