1. Raghuram Rajan’s 2nd term: PM Narendra Modi & FM Jaitley keen to retain him as RBI governor, says report

Raghuram Rajan’s 2nd term: PM Narendra Modi & FM Jaitley keen to retain him as RBI governor, says report

Raghuram Rajan may well bag a second term as the RBI governor, with a report suggesting that PM Narendra Modi and FM Arun Jaitley are keen to retain him.

By: | Updated: June 8, 2016 2:03 PM
Raghuram Rajan second term, Raghuram Rajan, RBI Raghuram Rajan’s 2nd term: Both Modi and Jaitley have refused to comment on the extension. (Reuters Photo)

Raghuram Rajan may well bag a second term as the RBI governor, with a report suggesting that PM Narendra Modi and FM Arun Jaitley are keen to retain him at the central bank. The news will come as a major relief to markets and economists.

“The government is likely to offer extension to RBI Governor Raghuram Rajan and the decision will be taken closer to August,” ET Now said citing its sources in the government.

“Reports of RBI governor Raghuram Rajan’s reluctance for second term are baseless. PM Narendra Modi and FM Arun Jaitley are keen on continuity of Rajan at RBI,” the channel said.

Speculation on Rajan’s second term has been doing the rounds for quite some time now, especially with BJP Rajya Sabha MP Subramanian Swamy openly asking for the RBI governor’s sacking. Swamy has even written a letter to PM Modi on the same.

Commenting on the speculation, Rajan in an interview to CNBC Awaaz said, “I cannot confirm or deny speculation on my tenure. You will have to wait for the announcement. Between now and September 4 there will be an announcement on my tenure.” “My longer-term desire is to get back to reasearch, academics and teaching,” he added.

On Tuesday, soon after releasing the RBI’s monetary policy review, Rajan had said that he can’t spoil the fun that the press is having on speculation of him continuing as RBI governor.

Rajan had said he can only point to the statements made by Prime Minister Narendra Modi as well as Finance Minister Arun Jaitley on the issue.

Both Modi and Jaitley have refused to comment on the extension of Rajan’s term, stating that this is not a “subject for media” to dwell on.

According to a Reuters report last week, Modi and Rajan have developed a close working rapport. With Modi’s patronage, it is more likely the government will reappoint Rajan, whose three-year term expires in September, should he wish to stay on, sources told Reuters.

Rajan is a darling of market experts, especially global investors, who have time and again lauded the RBI governor for his prudent policies and sound fundamentals. Many credit Rajan for tackling India’s double-digit inflation trouble and rupee crisis effectively.

Rajan took over as the RBI governor at a time when India’s inflation was above 10% and the Indian rupee was staring at a crisis. Not only did he hike rates to tame inflationary expectations, Rajan also took a number of steps to stem the rapid depreciation of rupee – opening a swap window for deposits from NRIs, being one of them. Come 2016, rupee is stable and inflation has reduced to sub-6% levels.

Jamal Mecklai, MD & CEO of Mecklai Financial & Commercial Services expects the Indian rupee and markets to weaken if Rajan is not reappointed. “If Rajan does not serve a second term, whether by his own choice or the government’s, the rupee and markets would definietly weaken,” Mecklai told FE Online. “Not only that I think markets and rupee will also be more volatile. However, whether the negative impact will be long lasting is difficult to say. A lot of conditions affect markets, and it also depends on who replaces Rajan,” Mecklai added.

However, DK Srivastava, Chief Policy Advisor at EY India has faith in India’s domestic fundamentals and expects the negative reaction to be short-lived. “If Rajan does not do a second term at RBI, I am sure the Indian rupee and markets will witness immediate downwards pressure. This is also because globally Rajan’s policies are well accepted and investors have immense faith in him. However, eventually India’s domestic fundamentals will take over and the markets and rupee will find their balance,” Srivastava said.

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  1. P
    Jun 8, 2016 at 9:56 pm
    Dr. Rajan is one of the world's foremost expert on keeping a national economy moving on the right track. Everyone, except a few politicians with an agenda, respects him. Dr. Subramanian Swamy's diatribe about Dr. Rajan is a shame. He should be thanking Dr. Rajan for taking leave from the prestigious University of Chicago to return to India for helping out. I am sure that, Dr. Rajan doesn't need this job. He is making a financial sacrifice to raise india's stature in the world financial markets. Since he will have to inform University of Chicago, whether or not, he is coming back for the Fall term, clock is running out fast. Any delay will lead to losing him.Not keeping him for another term will be a wrong signal to US investors. It will also discourage a lot of Indian origin scientists, engineers, and doctors to consider relocating to India as well as ventures capitalists to invest their energy and resources for Indian development. After today's great speech by PM Modi at the Joint Session of US House and Senate, show that Indian politicians welcomes talent.
    1. Krishnan Chundharan Krishnan
      Jun 8, 2016 at 3:03 pm
      All except a few expected rate cut by 0.25/0.5 in the RBI's Policy and bring cheers to Industrial sector, preferably. But Governor was standing by Economic Principle not to get big hand from public. Once again he added some scores to his firm decision. Inflation data creates many obstacles. Soon it will turn back on set of monsoon. Affixing a stamp on the Governor that he was a nominee/appointed by Congress govt., by S.Swmiji is ignored by all. Look at our President, Is he a nominee of the present Govt. at Centre. Apologiing for wrong remarks by finding facts is wise to Politicians. Raghu Ramji can contribut to buildup strong economic policy. The credit may go to Modiji also.
      1. C
        Jun 9, 2016 at 6:23 am
        Mr. Raghuram Rajan has to be retained as RBI governor for the second term without any doubt of any person other than himself whether he likes to stay as RBI governor or not.He is very intelligent that he is qualified as an engineer from IIT and economics from Harvard university and also he is professor in Chicago in economics.This is the perfect combination to analyse the thing as you said in an interview.After serving one term as RBI governor to accuse him that he is not fully Indian is baseless and is very absurd to do like that by the fact that he accepted in the first place to serve as RBI governor and that too this type of RBI governor has never been as RBI governor before.He did a good job for the country and that is the reason so many are supporting him for the second term.personally Mr. Raghuram Rajan that you are a perfect gentlemen as both engineer and economist and please accept my respect to you and hats off for your good analysing capability of any situation within the limit of any cirstances that you are put in the the interest of good work.You are both engineer and econimist and that is the reason you are always be in positive mood and good atude.Thank you Mr. Raghuram Rajan.
        1. C
          Jun 9, 2016 at 5:59 am
          Mr.Raghuram Rajan has to be retained as RBI governor at the highest level without any doubt of any persons except his own choice.Mr. Swamy, we can tell that Raghuram Rajan is fully Indian accepting that Raghuram Rajan was willing to serve as RBI governor in the first place.That itself says that he is for India and his blood is in India.By accusing him That he is not fully Indian is not legitimate and that too India has enjo good economic conditions in his endeavour.Mr. Raghuram Rajan that it is your final decision whether to continue as RBI governor or not, but one thing we are proud to say that you are complete gentlemen and totally salute you and hats off to you for all your positive values and good thinking.We all Indians should be proud that you are Indian first Thank you Mr.Raghuram Rajan.Proud to say that you are top Engineer from IIT and good economist.Perfect combination, that is why you are good analysing person.Thanks once again.
          1. S
            S K
            Jun 9, 2016 at 2:32 pm
            If somebody can convince the Chinese that it is Raghuram Rajan who has kept India's inflation on leash and has prevented the INR from slipping, they will gladly appoint him as Governor of the People's Bank of China. If UK can have a Canadian central banker, why not the Chinese?
            1. S
              S K
              Jun 9, 2016 at 2:29 pm
              PM Narendra Modi can either push his Jan Dhan Yojana or give in to the 'elite' demand for retaining Raghuram Rajan. He cannot have both.
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