Raghuram Rajan takes over as RBI chief amid rupee free fall and economy slowdown

India News Bulletin Desk

Indian economist and former International Monetary Fund chief economist Raghuram Rajan has taken charge as the head of Indian central bank RBI on September 4, 2013 as former Governor D Subbarao’s five-year term comes to a close.

Raghuram Rajan takes over as RBI governor
Image: Wikimedia Commons (Flickr WEF)

50-year-old Rajan, born in Bhopal to as Tamil family was appointed as the Reserve Bank of India’s 23rd Governor back in August but took charge only on Wednesday. Rajan’s entry into RBI comes at a time when India is experiencing its slowest economic growth in years. In the latest April-to-June quarter,Indian economy grew at a rate of just 4.4% as compared to previous growth rates of upto 10%.

In addition to an economic slowdown, Indian economy is facing another crisis – a free falling currency. Indian rupee (INR) has plunged 20% against the US dollar (USD) since since the last four months and its growth rate is at a ten-year low.

The rupee has declined even rapidly (10%) in the last month since Rajan’s appointment as RBI Governor was announced. The falling rupee has raised fears among global economists on whether India would be able to cut down on its current account deficit.

India's currency has declined 20% against the US dollar since May and its growth rate fallen to a ten-year low.

Rajan will head the central bank for three years until 2016. But this is not the economist’s first stint with India’s financial department. Previously, in 2008, prime minister Manmohan Singh appointed Rajan as an honorary economic advisor. In 2012, he then took over the role of the chief economic advisor to India’s Finance Ministry.

He has been widely acclaimed for his economic sense and also for predicting the global financial crisis of 2008 back in 2005.

Rajan’s entry into RBI on September 4 brought confidence in the Indian stock market and the rupee recovered more than 1% to 66.83 against the USD from Tuesday’s 67.63. the RBI also relaxed the curbs on overseas direct investment in Indian companies as Rajan took charge.

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