India's new central bank chief warns of unpopular steps to fight crisis

Mr Raghuram Rajan, newly appointed governor of the Reserve Bank of India (RBI), listens to a question during a news conference at the bank's headquarters in Mumbai, Sept 4, 2013. Mr Rajan, a suave, unflappable University of Chicago economist, will st
Mr Raghuram Rajan, newly appointed governor of the Reserve Bank of India (RBI), listens to a question during a news conference at the bank's headquarters in Mumbai, Sept 4, 2013. Mr Rajan, a suave, unflappable University of Chicago economist, will step into the eye of the storm roiling India's economy on Thursday as the new governor of India's central bank and chief defender of a nose-diving rupee. -- PHOTO: REUTERS

MUMBAI (AFP) - Top economist Raghuram Rajan warned on Wednesday that he might 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.

Mr Rajan, a former chief economist of the International Monetary Fund, sought to reassure rattled markets, saying India faces tough challenges but is fundamentally sound, as policymakers battle a plummeting rupee and decade-low growth.

In his first public comments after taking over as Reserve Bank of India (RBI) governor earlier on Wednesday, however, Mr 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.

Mr 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 per cent against the US dollar this year.

Mr 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 needs to be a "beacon of responsibility", and that protecting the value of money against corrosion of inflation is crucial.

Mr Subbarao said earlier on Wednesday that his successor was in for a bumpy ride with an economy that grew at a decade low of 5 per cent 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.

Mr Rajan will take charge operationally on Thursday at the bank's headquarters in financial hub Mumbai. Investors are looking to him to introduce policies to calm jittery markets and stabilise the rupee.

Mr Rajan left his post as a professor at the University of Chicago's Booth School of Business and returned to India last year to become an adviser to Prime Minister Manmohan Singh.