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Raghuram Rajan, chief economic advisor to the Finance Ministry, a former chief economist at the IMF who was among the first to predict the 2008 global financial crisis, will become the 23rd Governor of the Reserve Bank of India. He will take over from D Subbarao, who retires on September 4 amid a sharp economic slowdown and a plunging rupee.
"Prime Minister has approved the appointment of Raghuram Rajan as the Governor of Reserve Bank of India for a term of three years," said a Finance Ministry statement. His term is extendable by a period of two years.
Rajan's appointment came through on a day when the rupee hit a lifetime low of 61.80 against the US dollar. But as soon as his order filtered through the tickers, the currency recovered 20 paise, a measure of the confidence the market has in the celebrated monetary economist.
In remarks after the announcement, Rajan, 50, a PhD from MIT and a University of Chicago professor, said: "These are challenging times for the Indian economy, though no one can have any doubt about the country's promise. The Government and the Reserve Bank are working together to address these challenges." He cautioned that there is no "magic wand" to
make problems disappear instantly. "I have no doubt we will deal with them," he said.
He will be looking to extend this confidence as the economy battles its toughest slump in decades with the currency having lost 10.76 per cent against the US dollar since January 2013, the worst performer among all major currencies. The losses are on the back of a record current account deficit that has touched 4.8 per cent of GDP as gold, oil and coal imports ballooned and RBI's growth projections for 2013-14 dipped to 5.5 per cent.