New Delhi:
Chief Economic Advisor Raghuram Rajan will be the next Reserve Bank of India (RBI) Governor after incumbent D Subbarao retires in September.
"Prime Minister has approved the appointment of Dr. Raghuram Rajan as the Governor of Reserve Bank of India (RBI) for a term of three years..." Finance Ministry said in a statement on Tuesday.
50-year old Dr Rajan, a former International Monetary Fund (IMF) Chief Economist was appointed as the Chief Economic Advisor in the Finance Ministry in August last year. He is acclaimed for predicting the 2008 global financial crisis.
"We do not have a magic wand to make the problems disappear instantaneously, but I have absolutely no doubt we will deal with them," Dr Rajan said after his appointment.
The Indian rupee recovered dramatically on news of Dr. Rajan's appointment after it hit an all-time low of 61.80 and ended in the green at 60.77, wiping off all losses. The rupee had ended at 60.88 against the dollar on Monday.
Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said he was "delighted" by Dr Rajan's appointment and called it an "excellent" choice.
"He's had a lot of experience studying the Indian finance sector. I don't think we could have made a better choice...I don't think you could have had a better economist or a better professional to do the job," Dr Ahluwalia told NDTV.
Former RBI Governor and Chairman of the Prime Minister's Economic Advisory Council (PMEAC) C Rangarajan echoed Dr Ahluwalia's views and lauded the government for its choice.
"It's the right choice that a thorough professional has been appointed...," Arvind Virmani, former Chief Economic Advisor said.
Dr Rajan's appointment will ensure good relations between the Reserve Bank and the finance ministry, Jay Shankar, independent economist told NDTV
"Given the current economic turmoil, we need a lot of global experience. A person who understands global economy and fund flows. It's a welcome move. Over the last one year, he has also gained experience as the chief economic advisor," Mr Shankar said.
An alumnus of IIM-Ahmedabad and IIT-Delhi, Dr Rajan did his doctorate from the Massachusetts Institute of Technology (MIT). He was a professor at the University of Chicago's Booth School of Business before taking up the Finance Ministry assignment.
Dr Rajan will be the 23rd RBI Governor.
Planning Commission member Saumitra Chaudhuri and Economic Affairs Secretary Arvind Mayaram's names had also been floating around in the media as contenders for the RBI chief's position.
The government had been on the lookout for the next RBI Governor, ever since incumbent D Subbarao expressed his desire to "move on". Dr Subbarao, due to retire in September, was initially appointed for three years in 2008.
The government would ideally have wanted Dr Subbarao to continue considering the state of the Indian economy. Growth has slumped to a decade low and the rupee is trading at record lows.
With elections less than a year away, the government might have been comfortable with Dr Subbarao, who's been there and seen all.
Dr Rajan now faces a tall order as he has to balance growth with supporting a volatile rupee.