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India's New Bank Chief Faces Worst Economic Crisis in Years


India went outside the establishment to bring in a former chief economist for the IMF as the new head of the central bank. Raghuram Rajan took over the helm of the Reserve Bank of India this week, and the FT describes the problems he faces as “the most serious since the early 1990s.”

Rajan’s appointment breaks with the tradition in India of appointing party insiders to the post of central banker. Hiring Rajan, who has spent most of his life in the US and served as chief economist at the IMF from 2003 to 2006, is a sign of how bad India’s economic problems are. As the FT reports, he has his work cut out for him: “His immediate task will be help to stabilise the tumbling rupee, bolster slowing growth in Asia’s third biggest economy and stem an outflow of foreign investment.”

“India’s currency has depreciated 39 per cent over the last two years against the dollar,” the FT continues, and quotes the chief India economist at JP Morgan: “If the bleeding is not stopped India will face various serious consequences. It is one of the most serious economic quagmires India has ever been in.”

Reuters has the final word: “Raghuram Rajan must show he is as good at managing financial crises as he is at predicting them….[He] has strong credentials, and a winsome personality. What he doesn’t have is time.” We wish him well.

[Raghuram Rajan photo courtesy of International Monetary Fund]

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