MUMBAI – Top economist Raghuram Rajan warned on Wednesday that he may have to take unpopular steps to tackle India’s worst economic crisis in decades as he took over as the central bank’s new chief. Rajan, a former IMF chief economist, sought to reassure rattled markets, saying India faced tough challenges but was fundamentally sound, as policymakers battle a plummeting rupee and decade-low growth.
But in his first public comments after taking over as Reserve Bank of India (RBI) governor earlier on Wednesday, Rajan added that “some of the actions I take will not be popular”, without detailing them.
“The governorship of the central bank is not meant to win one votes or Facebook ‘likes’. But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism,” he said in a televised statement.
Rajan, famed for forecasting the 2008 global financial crisis, takes over from incumbent Duvvuri Subbarao, as India’s once-booming economy is caught in a quagmire of sharply slowing growth, high inflation, a record current account deficit and sliding currency.
Some analysts fear Asia’s third-largest economy could be heading for a meltdown with the rupee down around 17 percent against the dollar this year.
Rajan stressed that he would hew to the RBI’s mandate of “securing monetary stability” and sustaining confidence in the value of the country’s money, which means “low and stable inflation”. He added that the RBI needed to be a “beacon of responsibility” and that protecting the value of money against corrosion of inflation was crucial.
Subbarao said earlier Wednesday that his successor was in for a bumpy ride with an economy that grew at a decade low of 5% in the last financial year — way below the near double-digit levels notched up during the heady noughties.
“The country could not have asked for a more capable person to lead the RBI in these most difficult times,” he added. Rajan will take charge operationally on Thursday at the bank’s headquarters in financial hub Mumbai. Investors are looking to Rajan to introduce policies to calm jittery markets and stabilise the rupee. “It would be unfair to expect magic from one person,” said Siddhartha Sanyal, chief India economist with Barclays Capital.
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