Stormy welcome awaits new Reserve Bank chief
Internationally renowned economist Raghuram Rajan, who is taking over as RBI Governor, will plunge straight into a fire-fight situation as the country...
With India facing plethora of economic woes, Raghuram Rajan, who set to assume charge as 23rd RBI Governor, has his task cut out
Mumbai (PTI): Internationally renowned economist Raghuram Rajan, who is taking over as RBI Governor, will plunge straight into a fire-fight situation as the country battles a rapid fall in rupee, high inflation, low growth and burgeoning CAD. 50-year-old Rajan, a former chief economist with the IMF who was economic advisor to the finance ministry, will take over a difficult assignment from Duvvuri Subbarao on his completing five years in Mint Road.
Rajan has already said that he has no magic wand to face the challenge before the country but would deal with them one at a time. The Government, which was at the receiving end of Subbarao's unrelenting focus on inflation control at the cost of low interest rates, would hope that the new incumbent would reverse some of those policies.
"We have enough ideas. It is not just the currency, it is financial inclusion, it is growth. I think there is a lot to do. There are challenges in the economy. These things are not going to be overcome overnight. There is no magic wand. But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it.
"We will do it one step at a time. Make sure that it progresses everyday," he told reporters on Monday on his last day of office at the Finance Ministry. Rajan, who was appointed as the Chief Economic Advisor in the Finance Ministry in August last year, bring to RBI a vast experience gained at the IMF and during the brief stint in the government. Known for his frank views, Rajan was acclaimed for predicting the 2008 global financial crisis. In 2005, he had delivered a lecture critical of the financial sector, arguing that a financial disaster might be looming. Rajan, who was an 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.
There has been speculation that Rajan is not in favour of mid-quarter reviews and could dispense with the practice, although the scheduled mid-quarter review due later in the month would be brought out. While there have been some signs of improvement in CAD in the Q1 mainly on account of decline in gold imports, firming international oil rates in wake of geopolitical situation developing around Syria will put further pressure.
On the positive side, the good monsoon and pick up in exports may provide some support to Rajan's efforts. However, he will face a tough time in drawing a balance between the competing needs of keeping inflation under control and promoting growth.