Raghuram Rajan Resigns From Reserve Bank of India, Will Return to Academia
Rajan also went all out to fight bank NPAs.
There were also severe difference of opinion between Rajan and those in the government, including in the finance ministry bureaucracy, on the RBI's monetary policy, particularly on the issue of the central bank's refusal to lower interest rates.
Prime Minister Narendra Modi had never asked Rajan to retreat but a couple of things didn't assure the latter about his future as the RBI governor.
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In what is likely to appease the pro-growth lobby, Japanese brokerage Nomura has opined that most names being considered to fill the post of RBI Governor have a neutral-to-dovish stance on fighting inflation, unlike the incumbent Raghuram Rajan whose hawkishness is well known. The report also said that the government had ignored BJP President Subramanian Swamy's personal attacks at the governor, but had sought views from several stakeholders.
Since it is expected to be a close call between the "Leave" and "Remain" votes in the referendum which has emerged as a major risk related event for the global economy, the ASSOCHAM paper has said, " there could be an upheaval in the financial markets out of sheer panic, at least in the short term". The governor preferred higher rates so that inflation could be kept in check, while the government pushed for lower rates to stimulate growth. If inflation rises sharply, say due to a sharp rise in oil prices, it would not be sensible for a central bank to bring inflation within its target band immediately by raising interest rates so high as to kill all economic activity. He said a successor would announced "soon".
"It will be a more pro-growth atmosphere now", Swamy said by phone. "He has taken a call, we respect his tenure and we respect his contribution". Listing the long-term benefits of a low-inflationary economy, the Governor said a stable rupee can increase investors confidence in our monetary policy goals, foreign capital inflows will be more reliable and increase in the longer maturity buckets, including in rupee investments.
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The fake documents were created by affixing the donor's photograph on a document of a genuine relative of the recipient, he said. Analysts say widespread poverty in India's countryside makes the offer of cash for organs hard to resist.
Rajan was quick to add that for all this to happen and for money to indeed become cheaper, "industrialists will have to support efforts to improve loan recovery so that banks and bond markets feel comfortable with low credit spreads".
Stating that he will be returning to the USA university, from where he is on sabbatical, Rajan listed his unfinished agenda as seeing a monetary policy panel in place to broadly guide the central bank, and a clean-up of banks' balance sheets.
Is it someone who would cut the interest rates on demand from the North Block, limits his lectures to monetary policy and banking and at the most give gyan on the importance of Hindi on the Rajbhasha day at the central bank?
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What makes a good Reserve Bank of India (RBI) governor?