Rajan says no to second term

Ruing that his work on containing inflation and cleaning up books of the banks was “yet to be completed”, Rajan said: “While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016.”

Speculation has been rife over whether Rajan, former IMF Chief Economist known to have predicted the 2008 global financial crisis, would get a second term after BJP leader Subramanian Swamy launched a no-holds barred attack on him recently accusing him of destroying economy with his hawkish stance on interest rates.

Swamy had also questioned whether Rajan was “mentally, fully Indian” as he holds a US Green Card, among other allegations.53-year-old Rajan, who took charge as RBI Governor in September 2013 with a three-year term, had also ruffled feathers in the saffron camp with his outspoken views on issues like intolerance and his remarks about India being “one-eyed king in the land of blind”.

While Finance Minister Arun Jaitley called for restraint in public criticism in the wake of Swamy’s attacks, BJP president Amit Shah said the newly-nominated MP’s remarks were his personal opinion. Answering questions on another term for Rajan, Prime Minister Narendra Modi had said that this “administrative subject” should not be an issue of interest to the media and it “will come up only in September”.

In his letter to colleagues, 53-year-old Rajan, appointed by the previous UPA government in September 2013, said he “will, of course, always be available to serve my country when needed”.

Decision of Rajan, who was called a rockstar central banker, immediately set off speculation about his successor and the impact it could have on stock and bond markets when they open on Monday morning. Jaitley, who had earlier steadfastly refused to discuss in public the issue of a second term for Rajan, welcomed his decision saying he respects it and said the government appreciates his good work. A decision on successor to Rajan would be announced shortly, he said. 

Former Finance Minister P Chidambaram, during whose term Rajan was appointed, said he was disappointed and profoundly saddened by his decision against a second term, but he was not surprised by the development. “I am disappointed and profoundly saddened by the decision of Dr Raghuram Rajan to leave the RBI on completion of his term on September 4, 2016, but I hasten to add that I am not surprised at all,” he said in his reaction. 

The senior Congress leader said 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,” he added.

Top industry leaders, including Anand Mahindra, Deepak Parekh, NR Narayana Murthy, Kiran Mazumdar-Shaw and Mohandas Pai, said it will be “nation’s loss” as Rajan brought economic stability and enhanced India’s credibility on the world stage. 

Surprisingly, there were no comments from industry chambers like CII and FICCI. There have been concerns that Rajan’s exit, which has been termed as “Rexit”, could lead to adverse impact on the country’s financial markets.