New Delhi : Chief Economic Advisor Raghuram G Rajan, who as an IMF economist had predicted the 2008 global crisis, was on Tuesday appointed the new RBI Governor. Rajan, 50, will succeed D Subbarao, who pursued a hawkish policy of tight monetary control ignoring the government’s repeated pleas to ease interest rates to boost growth.
Subbarao will demit office on September 4. At 50, Rajan will also be among the youngest to occupy the high office at Mint Street in Mumbai.
“These are challenging times for the Indian economy and the RBI and government will work together,” Rajan said in a statement shortly after the announcement. “We don’t have a magic wand to make the problems disappear. But absolutely we will deal with them.”
His use of the word “we” instead of “I” itself shows his resolve to let the central bank work hand-in-hand with the government.
Rajan takes over as RBI governor for a 3-year tenure. He has a vision of making India a financial powerhouse that he articulated in the last Economic Survey when he said, “Slowdown is a wake-up call for increasing the pace of actions and reforms.”
His introduction to the economic survey laid stress on “shifting national spending from consumption to investment, removing the bottleneck to investment, growth, and job creation, in part through structural reforms, combating inflation both through monetary and supply side measures, and reducing the cost of raising finances.
Rajan 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 and was professor at the University of Chicago’s Booth School of Business before taking over as CEA. Economic administrators and the industry welcomed his appointment.
“Rajan will make an excellent Governor” as he has been dealing with the problems afflicting the economy in the last one year, said C Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council and a former RBI Governor. Planning Commission Deputy Chairman Montek Singh Ahluwalia said Rajan was coming in at a challenging time and he had 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.