Inflation adds to headaches for Raghuram Rajan's first policy review meeting

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Dubbed 'The Guv', hopes are high that Raghuram Rajan can find a formula to stabilise the rupee, calm inflationary pressure and at the same time spark a revival in growth. (AP) Dubbed 'The Guv', hopes are high that Raghuram Rajan can find a formula to stabilise the rupee, calm inflationary pressure and at the same time spark a revival in growth. (AP)
SummaryRajan has already warned he does not have a 'magic wand' to deal with India's economic crisis.

headed up towards 9-10 percent," said Daniel Martin, Asia Economist at Capital Economics in Singapore.

That makes the central bank's job more difficult because measures to stifle inflation, such as raising interest rates, could at the same time undermine economic growth, already strained and running at a decade low.

That partly explains why the central bank has not raised its policy rate to support the rupee, unlike Brazil and Indonesia. Instead, it forced up short-term rates.

Rajan, who has received the sort of media attention usually reserved for Bollywood stars, stunned financial markets on his first day in the job on September 4 by announcing a blaze of measures to support the currency and open up markets that triggered a rebound in the rupee and stock markets.

The rupee has recovered more than 6 percent against the dollar since Sept 3. Indian stocks have gained about 8 percent since then. The euphoria spread beyond financial markets. India's top dairy brand, Amul, launched an ad slogan: "Welcome Raghuramul Rajan!"

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