Raghuram Rajan appointed as the 23rd RBI governor :-
Raghuram Rajan today took over as the 23rd RBI governor.
Rajan took over the reins of the central bank from D Subbarao at a time when there is a slump in confidence in both the economy and the currency.
So what are the Challenges for him ???
Rajan has few policy options to revive the rupee but one thing he can do immediately is explain to financial markets more clearly what steps the central bank is taking and the thinking behind them. Investors and economists have complained that the bank has caused unnecessary confusion with some pronouncements.
The big question is whether the former chief economist of the International Monetary Fund (IMF), who famously predicted the 2008 global financial crisis, will take the helm of the Reserve Bank of India with a whisper or a bang. In other words, will he take his time or come out with fresh policy announcements like Bank of Japan Governor Haruhiko Kuroda, who launched a massive stimulus package within weeks of taking office earlier this year.
Another pressing concern for markets is whether Rajan plans to dismantle any of the mishmash of measures, including a hike in short-term interest rates, the central bank has unveiled since mid-July to prop up the rupee. Economists have expressed concern the steps could further damage the ailing economy.
Rajan, aware markets are scrutinising everything he says for clues about his intentions, has been circumspect in public, revealing little about whether he will pursue the policies of his predecessor, Duvvuri Subbarao, or change tack.
Either way, economists expect him to hold fire with any major measures until after the U.S. Federal Reserve meets on Sept 17-18, when it might announce a pivotal shift in its stimulus programme.
"ROCK STAR ACADEMIC IMAGE"
Rajeev Malik, an Indian-born economist at CLSA Singapore, fears Rajan's "rock star academic image" could be a hindrance. "That is because it has generated unrealistic hope that he has some magical prescription to fix our problems," he wrote in the Business Standard newspaper on Tuesday.
Analysts expect Rajan to improve the central bank's communication with markets, which could help in restoring confidence among investors. Outgoing governor Subbarao has been sharply criticised for failing to communicate the central bank's exchange rate policy effectively.
"One is tempted to say that if Mr Rajan can't help restore confidence in India's battered currency, nobody can," said Nicholas Spiro, managing director of Spiro Sovereign Strategy. "His immediate priority must be to restore credibility to Indian monetary policy which, over the past several weeks, has been a shambles."
Many economists say Rajan will refrain from taking action until after the U.S. Fed meeting, which is widely seen announcing a tapering off in the bank's huge bond-buying programme.
He faces a dilemma on policy rates, which other hard-hit emerging market economies such as Brazil and Indonesia have raised to support their currencies. Doing so in India could undermine economic growth further - already running at a decade low - but cutting them could hit the rupee.
Rajan is seen as close to Chidambaram and the pair had adjoining offices in the finance ministry "but he is a man of his own" stressed one policymaker who has been involved in recent meetings between the RBI and the ministry.
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Ongoing corrective upmove for sw(II) should find resistance at 5452,5481 and 5524. Lets See.
