RBI: Policies are more important than personalities
Dr Raghuram Rajan,
governor of Reserve Bank of India (RBI) ended months of speculation and
suspense and told his colleagues that he was not keen on second term as chief
of central bank. While Nomura says this news (Dr Rajan's decision not to
continue) is negative in near terms, according to ratings agency Fitch, from a
policy perspective, policies are more important than personalities.
In a release, Thomas
Rookmaaker, Director in Fitch's Asia-Pacific Sovereigns Group, says, "In
the past years, significant policy changes have been set in motion in India,
not in the least by governor Rajan. The problems associated with both high
inflation and weak bank balance sheets have been recognised, and policy makers
are doing something about it, including through the set-up of new policy
frameworks. Such institutionalization implies support for these policies beyond
the governor, also among government officials and broader within the RBI."
"Dr Rajan added
credibility to the RBI and there is no obvious successor of a similar
stature," Nomura says, adding, "There is also a risk of some delay in
unfinished reforms such as formation of a monetary policy committee, bank
restructuring and allowing repo transactions in the corporate bond
markets."
The government will
announce his successor shortly. As per media reports, the potential candidates
for the top post at RBI include Arvind Subramanian, Shaktikanta Das, Arvind
Panagariya, Urjit Patel, Arundhati Bhattacharya and RBI's former deputy
governors Rajesh Mohan, Subir Gokarn and former secretaries Ashok Chawla and
Vijay Kelkar.
Commenting on RBI
Governor's letter to RBI staff, Arundhati Bhattacharya, chairman of State Bank
of India (SBI) and also one of the contenders to the Governor's post, as per
media reports, said, "Dr Rajan is a person of very high calibre, who has
built ably on the reputation of our Central Bank and given it a very large
measure of credibility."
In his letter to staff,
Dr Rajan has listed what the central bank has managed to achieve in the past
three years and what remains to be done, although that process has also been
initiated. Stating that he will be returning to the US University, from where
he is on a sabbatical, Dr Rajan listed his unfinished agenda as seeing a
monetary policy panel in place to broadly guide the central bank, and a
clean-up of banks' balance sheets.
Listing the achievements,
since the time India's growth was high and inflation also high when he took
over, the RBI governor said price control, improving foreign exchange reserves,
currency stability, an eventual lowering of interest rates and extending a
helping hand for reforms stood out.
Much speculation had gone
into a possible second term for Dr Rajan, hailed by many as the best governor
the central bank could have possibly had on its board during the difficult
times India was going through, but also with some share of critics.
In fact, a petition that
was floated online pushing for a second term for this IIT alumnus, had tens of
thousands of netizens rooting for him, even as some critics like Bharatiya
Janata Party (BJP) leader Dr Subramanian Swamy were particularly harsh towards
Dr Rajan, asking Prime Minister Narendra Modi to let him go.
Infosys co-founder NR
Narayana Murthy, who has been batting, in fact, for not one but two more terms
for Rajan, said: "Have no doubts he will continue to add value to the
country. He deserves more dignity than what he was treated with."
Dr Swamy remained
unrelenting. "Raghuram Rajan was an employee of the Government of India.
We do not select employees on the basis of popular vote -- and, too, of
industrialists," he had said.
"...on due
reflection, and after consultation with the government, I want to share with
you that I will be returning to academia when my term as governor ends on 4
September 2016," Dr Rajan had said in his letter.
Nomura says,
"Although the news is negative in the near term, we do not expect a
lasting medium-term impact. The flexible inflation targeting framework is
intact and with the move to committee-based decision making underway, we do not
believe policymakers can turn a blind eye to inflation, irrespective of who
fills the governor’s chair."
Fitch too feels that
policies are more important than personalities, especially from a rating
perspective and institutionalisation implies support for these policies beyond
the governor. "The next governor seems to inherit a solid basis in this
regard, providing him (or her) a good opportunity to continue to pursue
relatively low consumer price inflation and strengthened bank balance
sheets," the ratings agency added.
No comments:
Post a Comment