India has appointed Raghuram Rajan, a former chief economist for the International Monetary Fund (IMF), as its new central bank governor.
Rajan, who has been serving as the Indian government’s chief economic adviser since last August, will succeed Duvvuri Subbarao, whose term as governor of the Reserve Bank of India (RBI) ends on 4 September 4, and will have an initial term of three years.
Rajan was chief economist of the IMF from 2003 until 2006 and over this period was highly critical of the financial sector. He argued that banks’ attempts to disperse risk through the sale of complex products posed a threat to global economic stability, and warned of a potential crisis.
In 2005, his warning of impending disaster was described as “Luddite” by former US treasury secretary, Lawrence Summers, but three years later he was widely regarded as prescient when major economies came close to meltdown.
Rajan’s appointment comes as the Indian rupee (INR) has been touching new lows due to India’s current account deficit, a broad measure of trade, while the economy is growing at its slowest pace in 10 years.
The tenure of his predecessor at the helm of the RBI was marked by tensions with India’s Congress-led government. Emergency measures introduced last month by the RBI to stabilise the INR have done little to assuage investor concerns, with the currency touching more lows, just before the announcement of Rajan’s appointment.
Rajan, who most recently has worked closely with the government’s finance minister, P Chidambaram, has said that “all options were on the table” to stabilise the currency.
“The Reserve Bank is a great institution with a tradition of integrity, independence and professionalism,” he declared at a briefing in New Delhi.
“These are challenging times for the Indian economy. No one can have doubt about the country’s promise. The government and the Reserve Bank are working together to address these challenges.”
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