India | India's central bank gov Rajan: Will he stay or will he go?

India’s central bank gov Rajan: Will he stay or will he go?

June 7, 2016 12:34 PM (UTC+8)

 

Cue the Clash song: Will he stay or will he go?

With central banks in the US, China and the European Union capturing all the headlines recently, it looks like Raghuram Rajan, India’s central bank governor, is a little desperate for attention.

Last week, one of India’s largest newspapers reported that Rajan had met with Prime Minister Narendra Modi and ruled out extending his term at the bank beyond Sept. 4. The news sparked a decline in India’s currency.

But on Tuesday, during his customary press briefing after monetary policy decisions, Rajan refused to give a definitive answer, and instead gave a brief and humorous statement on his future.

“It will be cruel for me to spoil the fun the press is having with all this speculation,” Rajan said with a grin. “I’m personally intrigued by all the letters I’m supposed to have written.”

Reserve Bank of India (RBI) Governor Raghuram Rajan attends a news conference after their bimonthly monetary policy review in Mumbai, India, June 7, 2016. REUTERS/Danish Siddiqui
Reserve Bank of India (RBI) Governor Raghuram Rajan attends a news conference after their bimonthly monetary policy review in Mumbai, India, June 7, 2016. REUTERS/Danish Siddiqui

He did say a decision would be reached after discussions with the government, and that reporters should watch statements from Modi and Finance Minister Arun Jaitley: “I’m sure you will know when there is news.”

But Modi, who is in Washington to meet President Obama has shown little urgency in clearing up the matter, saying last month that a decision could wait until closer to when Rajan’s term ends in September.

Neither Jaitley nor any other senior government official would comment on Rajan.

“It has become a market-moving event,” Kunal Kundu, a Bengaluru-based economist at Societe Generale told Bloomberg. “When there’s too much speculation, why allow it to foment? Either way, just put a stop to it. How does waiting till the last moment help? I don’t see any benefit or value in waiting till the last moment.”

While Rajan’s statement left room for interpretation, it had a clear subtext: Don’t believe everything that appears in print. It also signaled that more talks were needed before anything is finalized.

But Asia Unhedged would like to posit that with the world focused on the Janet Yellen, the chair of the US Federal Reserve Bank, and the potential for an interest rate hike in the US or England leaving the European Union that maybe Rajan we feeling slighted. That maybe he doesn’t feel the world his giving him enough credit or attention for all the work he’s done.

The former International Monetary Fund chief economist has built up foreign reserves, stabilized the rupee and advocated for fiscal discipline as India’s economy grows faster than a slowing China.

If you’re a betting man, the odds are Rajan stays as his leaving would risk undermining the sweeping reforms implemented since he took office, including a shift to inflation targeting.

And what better way to keep your name in the news than to keep the media guessing as to what you’re going to do.

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