All eyes are on the bi-monthly monetary policy announcement to be held on Tuesday. It's not about the policy decision the RBI governor Raghuram Rajan will make that everyone is looking forward to, but his views on the over month-long controversy on whether he would remain at the helm on the Mint street for the second term or will the government look for his replacement.
In fact, on the rate cut front, Firstpost's Dinesh Unnikrishnan has argued that when the world's fastest growing economy is growing at a rate of 7.6 percent in the fiscal year 2016 and 7.9 percent in the fourth quarter, then do we really need a rate cut boost?
If one believes the Gross Domestic Product (GDP) numbers, the economy is anyway expanding at an enviable rate and it doesn’t need an additional dose of rate cut right now, he adds.
There have been media reports in past few weeks that Rajan may not be looking at continuing and instead return to academics in the US. However, as his first term as the RBI chief is nearing completion in next couple of months, there is growing clamour among the both domestic and international financial market personalities to retain Rajan for the second-term for his work done, especially, in controlling inflation and taking up a slew of banking reforms.
Several of them argue that retaining Rajan will be a good bet for the government as his in-depth knowledge about the banking system and economy will hold good, especially, at a time when the economy has shown steady signs of improvement.
In fact, Standard & Poor's Ratings Services' chief economist Paul Sheard in an interview with Times of India, also said governor Rajan is a highly reputable economic professional.
"When he was appointed governor of RBI, I, as many other people, said that this is a wonderful appointment. This is again the ability of India to draw on its diaspora and attract top talent back into the service of economic development. He has done a great job in modernising the RBI. His reappointment will be taken well by the markets," said Sheard in the interview.
The markets watch this very closely and if they perceive that in some sense the government is abusing its ability to appoint the governor by putting in somebody, who would be predisposed to certain policy position or behaviour that would actually compromise independence of the central bank, that would be of concern to the markets, Sheard added.
Further, Mohamed El-Erian, Alliaz SE's chief economic adivser, also said markets would 'understandably' not respond well if Raghuram Rajan is not given a second term as Reserve Bank of India (RBI) governor, the Economic Times report said.
"He is rightly deemed as one of the very best central bank governors in the world," El-Erian said in an email interview. "Indeed, few can match his expertise, experience and knowledge."
Before the support Rajan has been garnering from international economist, the RBI governor underwent a volley of allegations by BJP's Rajya Sabha MP Subramanian Swamy.
According to Swamy, Rajan is to be blamed for wrecking the Indian economy, and in a letter written to PM Modi, said, "Governor Rajan is hurting Indian economy. The concept of containing inflation by raising interest rates is disastrous.”
Subramanian Swamy also alleged that Rajan is “mentally not fully Indian” and has “wilfully” wrecked the economy, adding further that the RBI governor's concept of raising interest rates to contain inflation was “disastrous.”
“Mujhe lagta hai RBI Governor hamare desh ke liye anukool nahin hain (I don’t think the RBI governor – Rajan – is fit for India),” Swamy had told ANI.
However, finance minister Arun Jaitley in a statement made recently with regards to attack on Rajan said the debate should be about the issues and policies, and not about the personalities.
"I do not approve of any of these comments being made by anyone as far as the personality is concerned, because the RBI and its Governor is an important institution in Indian economy," Jaitley told PTI in an interview here.
According to media reports, despite the raging debate over Rajan's continuation, his rapport with PM Modi in recent years could certainly give him an edge to stay put on the Mint Street.
With agency inputs
Published Date: Jun 06, 2016 12:46 PM | Updated Date: Jun 06, 2016 12:46 PM