Star economist takes over India's central bank

NEW DELHI: India’s new central bank chief Raghuram Rajan takes over the helm this week as the nation grapples with its worst financial crisis in decades, sparked by a plunging rupee, a record trade gap and a sharp economic slowdown.

Rajan, a high-profile former IMF chief economist renowned for predicting the 2008 global financial collapse, moves into the Reserve Bank of India’s office on Thursday, replacing his retiring predecessor Duvvuri Subbarao.

The appointment of the informal, outspoken diplomat’s son – described by the Times of India as an “economist with rock star appeal” – comes as some analysts fear the once-booming economy could be heading for a meltdown.

India’s economy has gone dramatically downhill since the so-called “Indian Summer” – the heady noughties when growth regularly exceeded 8% and the country was a global investor favourite.

Rajan, who qualified as an engineer at the Indian Institute of Technology and later did a management doctorate at the Massachusetts Institute of Technology, faces a virtually impossible “trilemma” in his new job, analysts say.

He inherits an economy with a record current account deficit – the broadest measure of trade, a currency which has lost 16% against the dollar this year and annual growth at its weakest in a decade at 5%.

He’s “in an unenviable situation,” D.K. Joshi, chief economist of leading credit rating agency Crisil, told AFP.

The 50-year-old Rajan cautioned against expecting too much from his appointment – saying there are no “quick fixes“.

“No one can doubt the country’s promise,” the economist said after being named in early August to the post, but added, “there is no magic wand to make the problems disappear instantaneously“. – AFP

AFP