RBI governor Raghuram Rajan has refused to remain for another term. His predecessors served at least 5 years in office. And he is decidedly one of the ablest and most brilliant. He is also an outstanding economist and his talk at the London School of Economics on the global economic crisis caused a stir. His quitting after 3 years is of course prompted by political tension. He was having differences with finance Minister Arun Jaitley and other BJP leaders. His stand on intolerance made him further unpopular with them. He will now go into academics and teach at Chicago University. His departure is another case of a continuing brain drain for which the Modi Sarkar is responsible. Rajan pulled India out of the global slowdown and stabilized the economy. He also stabilized the rupee and curbed inflation. The moves that he took stimulated the country’s economic growth. Rajan also went all out to fight bank NPAs. If he continued, he could have effected a major reform of the banking sector.
There may be critics of Rajan’s policy as RBI governor. But the fact is that global investors and international rating agencies go by it. Rajan’s exit will impair credibility for the Indian economy and sap investor confidence. He would have stayed on if the government had not practically eased him out. The government is keen on a smooth changeover and will take time to find a replacement. It is confident that there will be no sharp volatility in the exchange rate as a result of Rajan’s exit.