Raghuram Rajan Ending his Tenure as RBI on a High Note

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While going back, he gave a nice gift to India, Raghuram Rajan RBI Governor unchanged at interest rates at 6.5% for August Monetary Policy. After his last monetary policy meeting Tuesday, Mr Rajan dismissed his critics and said that he “enjoyed every minute” of his time at the helm of the central bank.

The Economic ‘Rock Star’ – Mr. Rajan, whose three-year term as governor ends Sept 4, has been one of India’s most high-profile central bank governors, partly because of his international credentials which include being the former chief economist of the International Monetary Fund.

Cautioning on the inflation front, Rajan said, “Risks to the inflation target of 5 per cent for March 2017 continue to be on the upside. Furthermore, while the direct statistical effect of house rent allowances under the 7th CPC’s award may be looked through, its impact on inflation expectations will have to be carefully monitored so as to pre-empt a generalization of inflation pressures. In terms of immediate outcomes, much will depend on the benign effects of the monsoon on food prices.”

On the growth front, Rajan said, “Looking ahead, the momentum of growth is expected to be quickened by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the disbursement of pay, pension and arrears following the implementation of the 7th CPC’s award.”

Rajan had in his last monetary policy review also maintained status quo on the key rates. “More monetary transmission to support the revival of growth continues to be critical. The government’s reform measures on small savings rates combined with the Reserve Bank’s refinements in the liquidity management framework should help the transmission of past policy rate reductions into lending rates of banks,” Rajan had said, adding that the stance of monetary policy remains accommodative. “The Reserve Bank will monitor macroeconomic and financial developments for any further scope for policy action,” he had said.

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