Raghuram Rajan, the chief economic adviser to the government of India, has been appointed as the new Governor of Reserve Bank of India.
Prime Minister Manmohan Singh has approved the appointment of Rajan as RBI chief for a term of three years, the Finance Ministry said in a statement on Tuesday. He will replace the incumbent Duvvuri Subbarao, whose five-year tenure ends on September 4.
The news of the appointment of the former IMF Chief Economist as RBI Governor came on day when the Indian rupee hit a historic low.
Indian stock markets tumbled nearly 500 points today on investor concern that the central bank is set to unleash more tightening measures in coming days to check the rupee.
The depreciating rupee, decade-low growth and high inflation are the key issues that demand Rajan's immediate attention. The huge current account deficit is adding to the woes of the economy.
The dependence on global markets for its oil requirement coupled with huge gold imports have worsened the current account balance of the country. The government is expected to unveil new measures to contain the ballooning current account deficit soon.
Rajan, who warned about the global financial crisis of 2008, joined the government last August as Chief Economic Adviser in the finance ministry. He has a doctorate from Massachusetts Institute of Technology.
The outgoing RBI Chief Subbarao has reduced key repo and reverse rates thrice earlier this year to revive the flagging economic growth.
However, after the exchange rate of rupee as well as those of other emerging market currencies depreciated strongly after the announcement of Federal Reserve on scaling back of quantitative easing, Subbarao hiked couple of interest rates in mid-July. Despite taking several measures, the rupee has continued its depreciation.
The Indian rupee snapped back against the U.S. dollar at the end of Tuesday's deals, recapturing a whopping 1.6 percent of gains from its fresh record low of 61.81 hit earlier in the morning.
Rajan taught at the Graduate School of Business at the University of Chicago, before joining IMF in 2003.
by RTT Staff Writer
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