Raguram Rajan to be new RBI Governor

He will succeed D Subbarao whose term ends on September 5

Raghuram Rajan, currently the Chief Economic Advisor to the government of India was on 06 August 2013(Tuesday) appointed the Reserve Bank of India's (RBI) governor. Finance Ministry's office has confirmed the appointment for three years..

There were two other contenders -- economic affairs secretary Arvind Mayaram and Planning Commission member Saumitra Chaudhuri.

Rajan will replace 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.Known for his frank views, Rajan was also honorary economic advisor to the Prime Minister. He was acclaimed for predicting the 2008 global financial crisis.

An alumni of IIM-Ahmedabad and IIT-Delhi, Rajan 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.

The former IMF chief economist had emerged as the key pointsman for Finance minister P Chidambaram, dealing with issues as diverse as a new development index to calm down nerves in the markets.

Apart from a sound understanding of the economic and financial system, what also works in favour of Rajan is his familiarity with key players in the global economic system, especially in uncertain times like at present. Besides, he is expected to get new ideas into RBI, which many on Raisina Hill believe is too conservative.

At the same time, a professional economist like Rajan is expected to take an independent view of applicants for bank licences and not act under the finance ministry's pressure. Rajan's appointment comes at a time when the economy is struggling with a high Current Account Deficit (CAD) and a depreciating rupee.