Modi government criticised after RBI chief quits

Raghuram Rajan, governor of the Reserve Bank of India, at a news conference in Mumbai, India, on June 7.
Raghuram Rajan, governor of the Reserve Bank of India, at a news conference in Mumbai, India, on June 7.PHOTO: BLOOMBERG
Arvind Subramanian
Arvind Subramanian
Arundhati Bhattacharya
Arundhati Bhattacharya

Decision raises concern over whether Rajan's successor can live up to his high standards

Reserve Bank of India (RBI) governor Raghuram Rajan's decision to quit after his three-year term ends in September opened the government up to criticism amid concerns over whether a successor would bring the same level of credibility and independence to the central bank.

Mr Rajan, a former International Monetary Fund (IMF) economist often called an "inflation warrior" and "rock star" - for his focus on curbing inflation and speaking his mind - ended months of speculation over a possible second term with a letter to his colleagues on Saturday announcing his decision to return to Chicago University as a finance professor.

Indicating that he was not averse to a second term to complete an unfinished agenda, including an ongoing clean-up of bad bank assets, Mr Rajan wrote "I was open to seeing these developments through".

However, the public campaign for his ouster, coming chiefly from a member of the ruling Bharatiya Janata Party's (BJP) appeared to reflect opposition to his continuation.

  • POTENTIAL SUCCESSORS

  • The following names are doing the rounds as possible successors to Reserve Bank of India (RBI) Governor Raghuram Rajan when he steps down.

    ARVIND SUBRAMANIAN

    He is the current Chief Economic Adviser to the government of India, a post held by Dr Rajan before he was appointed RBI governor. An author of two books, Dr Subramanian, 57, is a former economist of the International Monetary Fund.

    SHAKTIKANTA DAS

    He is Economic Affairs Secretary at the Indian Ministry of Finance, having assumed the role in August 2015. Mr Das, 59, is a career Indian Administrative Service officer who already serves on the central board of directors of RBI and is also a board member of capital markets regulator Securities and Exchange Board of India (SEBI).

    URJIT PATEL

    Dr Patel, 52, is an eminent economist, consultant and banker currently serving as deputy governor of the RBI since January 2013. He has also been an advisor to the Boston Consulting Group. Prior to joining the RBI, he worked at the IMF.

    ARUNDHATI BHATTACHARYA

    Ms Bhattacharya, 60, is the chairman and managing director of India's biggest bank, the State Bank of India.

    The first woman to hold the post, she started her career in the financial sector as a probationary officer at SEBI in 1977.

BJP leader Subramanian Swamy accused him of not being "Indian enough" for retaining his green card and called his decision to hold interest rates "disastrous".

Hundreds took to Twitter over Mr Rajan's exit, with many feeling the government had not adequately backed him and that his experience is needed at the central bank, while right-wing supporters, who had been seeking his ouster, wondered what the big deal was about.

Some leading corporate leaders openly expressed their admiration for Mr Rajan.

"In my travels around the world and encounters with leading overseas businessmen, it became clear that during his tenure he greatly enhanced the credibility and bankability of India," noted Mr Anand Mahindra, chairman Mahindra group.

Mr Rahul Gandhi, vice-president of the opposition Congress party, was sarcastic in a tweet, saying that Prime Minister Narendra Modi "knows everything... doesn't need an expert like Rajan".

Mr Rajan was internationally known for being among those who predicted the 2008 global economic crisis. He was brought in by the previous Congress-led government in 2013 and credited with helping stabilise the Indian rupee.

Under a groundswell of opinion on a matter that does not usually provoke such heated public debate, finance minister Arun Jaitley said a decision on the next governor would be taken soon.

Several names were thrown up, including State Bank of India chief Arundhati Bhattacharya and deputy RBI governor Urjit Patel.

But analysts said the government had a tough decision.

"Just having him there gave confidence to financial investors about the Indian market. They won't find a person with the same stature as him. He probably felt his voice was being stifled," said Mr Rishi Sahai, managing director of investment bank Cogence Advisors.

A version of this article appeared in the print edition of The Straits Times on June 20, 2016, with the headline 'Modi govt criticised after reserve bank chief quits'. Print Edition | Subscribe