Raghuram Rajan: Financial crisis prophet-to-RBI chief?
The man widely expected to be the next Reserve Bank of India (RBI) governor favours clipping the autocratic power of the role and giving more say to a monetary policy committee.
Raghuram Rajan, who in 2005 predicted the global financial crisis, also believes that inflation of around 5 percent is "reasonable" in a developing economy, rejecting the notion of a "new normal" for India of 7-8 percent.
That's a view shared by the RBI, which has struggled for years to curb inflation and a sign that Rajan would not radically alter the thrust of monetary policy.
Inflation has been stuck above 7 percent for most of the past three years, limiting the central bank's ability to support economic growth as expansion slowed dramatically from more than 9 percent in early 2011 to just 4.5 percent in the December quarter of 2012.
India is an outlier in setting policy, with power vested solely in the governor. Giving more power to a committee would align the RBI more closely with other major central banks.
"I do think that broadening the policy-setting from being in the mind of the governor may, over time, bring a broader set of views and allow for more continuity," Rajan said during an interview in his office in New Delhi, where he is chief economic adviser to Finance Minister P. Chidambaram.
The son of a diplomat father, Rajan, 50, has spent a large part of his life abroad, as chief economist at the International Monetary Fund and a professor at the University of Chicago,
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