Raghuram Rajan to take over the helm of India’s central bank

Former chief economist with the International Monetary Fund (IMF) and economic advisor to the Finance Ministry, Raghuram Rajan, is all set to take over the reins of RBI from his predecessor Duvvuri Subbarao, as twenty-third Governor of the central bank at a time when the country is facing huge economic stress, with rapid fall in rupee, high inflation, low growth and yawning current account deficit (CAD).

Acknowledging the difficult situation that the country is in Rajan, already playing safe, has said that he has no magic wand to face the challenge before the country and would deal the challenges one by one. However, the Government, which had a hard time during Subbarao's tenure, owing to his unrelenting focus on inflation control at the cost of low interest rates, is already counting on the new RBI governor and expecting the new incumbent to reverse some of those stiff policies.

Further, the markets are also waiting to see whether the new governor will come out with fresh policy announcements like Bank of Japan Governor Haruhiko Kuroda, who launched a massive stimulus package within weeks of taking office earlier this year. Another factor which the markets would watch out for will be of Rajan’s plan to dismantle any of the mishmash of measures, including a hike in short-term interest rates, which the central bank has unveiled since mid-July to prop up the rupee.

Rajan, who was appointed as the Chief Economic Advisor in the Finance Ministry in August last year, would bring to RBI a vast experience gained at the IMF and during the brief stint in the government. The new governor is expected to have enough ideas and solutions to many of the problems, which include not just the currency, but also financial inclusion along with growth.

Rajan, who has being heralded as the savior the country needs, 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, which holds true in the current scenario.