India’s loss

19 June 2016 By Una Galani Follow @ugalani

Raghuram Rajan will leave the Reserve Bank of India in September. Nasty politics may have forced his decision. The governor’s departure raises the risk that key economic and financial reforms he started will not be completed. India’s credibility in global markets will suffer

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Indian central bank governor Raghuram Rajan said on June 18 that he would step down in September after his three-year term ends.

It will be the first time since 1992 that a governor of the Reserve Bank of India has departed without extending his term.

In a letter to RBI staff, Rajan said he planned to return to academia, even as he noted two of his actions - the creation of a monetary policy committee to set interest rates and the clean-up of the heavily indebted banking sector - remained unfinished.

“While I was open to seeing these developments through, 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 Sept. 4, 2016,” Rajan wrote.

A senior government official told Reuters there were seven candidates on an initial long list to replace Rajan, including RBI Deputy Governor Urjit Patel and Arundhati Bhattacharya, who is chair of State Bank of India, the country’s largest bank. The others are Vijay Kelkar, Rakesh Mohan, Ashok Lahiri, Subir Gokarn and Ashok Chawla.

The candidates are mostly veterans of the RBI, the Indian civil service, the International Monetary Fund or the World Bank.

Parliament member Subramanian Swamy, a Hindu nationalist and former Harvard economist, said on Twitter that he was delighted that Rajan “has said he will go back to U.S. Whatever fig leaf he wants for hiding the reality we should not grudge it. Say goodbye!” Swamy had previously described Rajan as “mentally not fully Indian”.

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