Reactions to Rajan’s Decision to Leave the Reserve Bank of India

  • Finance Minister Jaitley says a successor will be named soon
  • Strategist says ‘one step forward, two steps back’ for India

Raghuram Rajan will return to academia when his three-year term as governor of the Reserve Bank of India concludes in September, a decision that ends uncertainty about his future while creating risks for Asia’s No. 3 economy. Here are some of the reactions to his announcement, which came in a letter to the central bank’s staff published on Saturday following criticism of the governor by an ally of Prime Minister Narendra Modi.

Government, Opposition

  • Finance Minister Arun Jaitley on Twitter: “The Government appreciates the good work done by him and respects his decision. A decision on his successor would be announced shortly.”

  • Lawmaker Subramanian Swamy -- the Modi ally who’d been seeking Rajan’s dismissal, claiming he’d kept interest rates too high and stifled growth -- on Twitter: "My admiration for Namo has gone up hugely. Media, industrialists, and international bureaucrats piled on him for R3, but he did not bend." Swamy was using "Namo" to refer to Modi and "R3" for Rajan.

  • Rahul Gandhi, a leader of the opposition Congress party, on Twitter: "Prime Minister Narendra Modi knows everything. He has no need for experts like Raghuram Rajan."
  • Palaniappan Chidambaram, former finance minister under the previous government, in a statement: “The government had invited this development through a craftily planned campaign of insinuations, baseless allegations and puerile attacks on a distinguished academic and economist. As I had said some time ago, this government did not deserve Dr. Rajan. Nevertheless, India is the loser.”

Investors, Economists

  • Harvard University Professor Lawrence Summers: "Ragu Rajan will be missed. He is one of the few central bank governors who has changed the regime in a major country. This is a major accomplishment. I hope very much for the sake of India and the global economy that his policy innovations are a foundation for what is to come."
  • Alberto Gallo, head of macro strategies at Algebris Investments Ltd. in London, on Twitter: “We’ll miss his courage to go against consensus. Great loss for #India. Without Raghu #Rajan, prepare for short-term stimulus, higher inflation and bank losses later. #India makes one step forward, two steps back”

  • Vikas Khemani, chief executive officer at Edelweiss Securities Ltd. in Mumbai. CNBC-TV18 tweets that Khemani says Rajan’s exit will not be a major setback for the market and that the next governor will also do a good job.

  • Tirthankar Patnaik, economist at Mizuho Bank Ltd., by phone: “This is a negative surprise for India. In India’s impending macro scenario, Rajan’s presence would have been really, really important. Without him, things are likely to be much more difficult.

Bankers, Lenders

  • State Bank of India’s Chairman Arundhati Bhattacharya in an e-mailed statement: "Dr. Rajan is a person of very high caliber, who has built ably on the reputation of our central bank and given it a very large measure of credibility."

  • Housing Development Finance Corp. Chairman Deepak Parekh to BloombergQuint: “I don’t think it’s going to make a big difference -- that money is going to start going out because the governor has stepped down.”

Industry

  • Mahindra & Mahindra Ltd. Chairman Anand Mahindra, cited by PTI: "In my travels around the world and encounters with leading overseas businessmen it became clear that during his tenure he greatly enhanced the credibility and bankability of India. I trust that a successor will be found who will continue and enhance the great work done by Governor Rajan.”

  • The Associated Chambers of Commerce & Industry of India, in an e-mailed statement attributed to Secretary General D.S. Rawat: “Dr. Raghuram Rajan leaving the RBI at a time when a tumultuous global economy poses several risks to India along with the banks grappling with an unprecedented challenge of mounting non-performing assets is quite unfortunate.”

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