Replacing ‘James Bond’: India begins search for new central bank chief to champion reforms
As India seeks a new central bank chief, many investors are pushing a clear message: the successor to Raghuram Rajan may lack his gravitas, but must defend the Reserve Bank of India’s autonomy at a critical juncture in its history.
Under Rajan, who unexpectedly announced on Saturday he would step down when his tenure ends in September, the RBI has started to institutionalise its decision-making and reduce the power of the governor, including through the introduction of an inflation target that will guide monetary policy decisions.
But Rajan’s announcement, in a letter to staff, has spread confusion and stunned RBI and government officials.
The choice of successor must be based on finding a leader that will continue the new monetary project, targeting lower inflation
It also follows strident criticism of Rajan from right-wing members of Prime Minister Narendra Modi’s Bharatiya Janata Party, prompting investors to ask whether politics played a role in his departure.
That is putting the question of the RBI’s autonomy front and centre, especially as Rajan may not get to see through the next plank of his reform plan – the creation of a monetary policy committee to set interest rates, which was passed into law last month but whose final composition has yet to be announced.
The RBI is not statutorily independent from the government but has long enjoyed wide latitude.
“The choice of successor must be based on finding a leader that will continue the new monetary project, targeting lower inflation,” said the head of portfolio management for emerging Asia at PIMCO, Luke Spajic, who sees finding the right mix of experience, deft thought leadership and personal charisma that satisfies all camps as a daunting challenge.
India’s ‘rock star’ central bank chief Raghuram Rajan will step down in surprise move
