Though it is not at all surprising that Prime Minister Narendra Modi is taking his own time in announcing Raghuram Rajan’s successor at RBI considering the past experience of top-level appointments in the regulatory bodies Trai and Sebi, it will be a good idea to clear the cloud quickly in this case so that the next RBI Governor has enough time to understand the current situation before taking over from Rajan.
When asked about the possibility of RBI governor Raghuram Rajan’s re-appointment, prime minister Narendra Modi had told The Wall Street Journal in an interview in May that, “I don’t think this administrative subject should be an issue of interest to the media. Besides, it will come up only in September”.
Since then, a lot of water has flown under the bridge – Rajan, in a message to the RBI staff on June 18, made it clear that he would return to academics and ruled out the possibility of his extension – and there has been a wide range of speculation after that over who will take over from him.
The probable names under consideration have ranged from former RBI deputy governors like Rakesh Mohan and Subir Gokarn to NITI Aayog vice-chairman Arvind Panagariya, chief economic advisor Arvind Subramanian, and now economic affairs secretary Shaktikanta Das.
It was earlier expected that PM Modi will clear the name immediately after his return from the Africa visit on Monday, but that has not happened and it is now believed that the announcement may be made any time before the start of the Monsoon session on July 18.
Obviously, it will not be a good idea to keep this speculation window open during the session, especially because of the controversy over Rajan that ultimately forced him to take the decision of making himself unavailable for extension.
But, going by the past experience, this government has not been in a hurry to clear appointments for the top government and regulatory jobs — extension of Sebi chairman U K Sinha at the last moment and that of Trai chairman R S Sharma after his predecessor Rahul Khullar retired, are among the prominent examples.
So, if PM Modi sticks to his style, whether the current speculations are on the right track or not will be known only towards the end of August or probably in September first week.
The problem in that case, though, would be, the new governor will miss the time he can get to understand the challenges before taking up the top job at RBI like Rajan did.
Rajan said in his June 18 message: “While all of what we laid out on that first day is done, two subsequent developments are yet to be completed. Inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed. Moreover, the bank clean up initiated under the Asset Quality Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also pose some risks in the short term.”
It would be good if the next governor has the option of working with Rajan for some time before he leaves on September 4.
This would require PM Modi to change his approach in this case and announce the name of Rajan’s successor quickly, which the government sources are indicating in the last few days.
He will also do well by giving a go by to his preference for those who have experience of working in the government, in this case, and appoint a reputed economist or someone from the industry who can take the monetary policy beyond what suits the government and also succeeds in keeping the confidence of the foreign investors intact, in India.