After Rajan Who? PM Modi Meets Arun Jaitley Today To Discuss New RBI Chief

New Delhi: Prime Minister Narendra Modi will begin discussions today with Finance Minister Arun Jaitley to pick a successor to Reserve Bank of India Governor Raghuram Rajan, whose term ends in September.  

The Prime Minister will meet Mr Jaitley in his office immediately after a meeting of the union cabinet this morning.

The corridors of the stately North and South Blocks that house the offices of the Prime Minister and the Finance Minister have been buzzing all week with the names of people who could replace Dr Rajan. Among those being talked about are Economic Affairs Secretary Shaktikanta Das, Niti Ayog Vice Chairman Arvind Panagriya and former RBI deputy governors and noted economists Subir Gokarn and Rakesh Mohan.

PM Modi needs to juggle competing demands from within his own party, the economy's need for more stimulus and investors' demands for an independent thinker.

Traditionally, senior bureaucrats in the economic affairs department have seamlessly transitioned to the central bank because they understand internal economic challenges. But the RBI governor now must also possess experience and expertise at a global economy level.

Also, the Indian economy's biggest challenge right now is a banks crisis over non-performing loans and the RBI governor must be able to tackle that. "The government has names that fit one or two of these criteria. The right person has to fit all three," a senior official said.  

Global and Indian investors have been on edge with reports that Prime Minister Modi could select the new RBI governor within 48 hours of his return from his Africa tour yesterday.

But sources said the government will weigh whether to announce a new governor before the RBI's next policy announcement in August. A section in the government suggests it would be prudent to wait till the end of Dr Rajan's term so as not to unsettle him. But another argues that an early announcement will give the new Governor a chance to prepare for the crucial role.

Dr Rajan - held in high esteem for defusing a currency crisis, cutting interest rates and overhauling the way the RBI operates, including introducing inflation targeting - had stunned financial markets last month by announcing that he would step down after a single three-year term to return to academia. The government responded with a tweet from the finance minister that the next governor would be announced soon.

Raghuram Rajan's sudden exit came after persistent criticism from BJP lawmaker Subramanian Swamy and right-wing affiliates.