India guessing banker Rajan’s future

AFP

Will he stay or will he go? That’s the question gripping India as speculation whirls about the future of central bank chief Raghuram Rajan, dubbed ‘rock star’ and ‘James Bond’.
Rajan’s three-year term as Reserve Bank of India (RBI) governor ends in September and the Indian media is abuzz with predictions about whether he will be given a second stint.
The 53-year-old, who enjoys a mass appeal in India not normally associated with a banker, has remained tight-lipped about his intentions while the government has given nothing away.
“As far as the question of me continuing in this position after September 4 goes, it would be cruel of me to spoil the fun the press is having,” Rajan told a press conference in Mumbai Tuesday.
“In all such cases the decision is reached after discussions between the government and the incumbent. I’m sure you will know when there is news,” he added.
Rajan, who famously predicted the 2008 global financial crisis, has been widely credited with bringing stability to India’s economy since his appointment as RBI governor in
September 2013.
But the former IMF chief economist has clashed with Prime Minister Narendra Modi’s Hindu nationalist government over how quickly the central bank should cut rates.
He’s also faced personal attacks from right-wing MPs in India’s ruling Bharatiya Janata Party (BJP).
Rajan took over the reins of the RBI at a time when India’s economy was struggling with a ballooning current account deficit, a plummeting currency and decade-low economic growth.
To mark his appointment the Economic Times newspaper mocked up an image of him as fictional British Secret Service agent James Bond pointing a pistol made of Indian
rupee notes.
Rajan has successfully taken aim at inflation — bringing it down from double-digit levels to 5.4 percent currently — and has been credited for creating a stable environment for the economy to grow.
India’s economy expanded by 7.9 percent in the fourth quarter of 2015-16, the fastest of any major economy.
Rajan has also been praised for starting to tackle a mountain of bad bank loans.
“Overall Rajan has done a fantastic job and I am optimistic of his second tenure. The government will take a decision which is good for the Indian economy in the long run,” Arun Singh, a senior economist at Dun and Bradstreet said.
‘I do what I do’
Rajan’s good looks, suave demeanour and habit of providing a colourful quote have seen him amass a huge fan following among the general public.
He sent Twitter users aflutter last year when he told reporters after cutting interest rates that the snip wasn’t meant to be a Diwali bonus and he was neither a hawk nor Santa Claus.
“My name is Raghuram Rajan and I do what I do,” he declared, smiling.
In a sign of his popularity, almost 60,000 people have signed an online petition calling for him to be given a second term.
Yet his straight-talking has roiled some in India’s right-wing government.
He ruffled feathers last year after wading into a debate about intolerance following the killing of a Muslim man suspected of eating beef — a taboo in the Hindu-majority nation.
Populist politician Subramanian Swamy has been leading a verbal onslaught against Rajan, accusing the former University of Chicago professor of being “mentally not fully Indian”, referring to his United States Green Card.
Swamy also accused Rajan of “wilfully and deliberately wrecking the Indian economy” — a claim most analysts agree is unfounded.
Rajan has slashed interest rates over the past 18 months to their lowest level since early 2011 — but the BJP wanted deeper cuts to boost economic growth further.
Rajan has maintained a dignified stand against the comments, telling NDTV: “My work shows my love for India”.
A decision on Rajan’s future is not expected to be announced until August and some investors appear stirred, if not shaken, by the uncertainty.
The Indian stock market was jittery recently after a newspaper reported that Rajan had sent a letter to Modi telling him he wanted to return to the US to continue his academic work.
Rajan denied writing such a note but has admitted openly that he sees his long-term future back in academia.
“Rajan is a good governor but the RBI institution is much stronger than one person,” Sujan Hajra, chief economist at Anand Rathi securities told AFP.
“If he goes, there will be an impact on investor sentiments but the systems in place at the RBI will ensure stability.”