RBI Governor Raghuram Rajan ends speculations, says will go back to academia after end of term

After a long and much discussed speculation over whether the Modi government will give a second term to RBI governor Raghuram Rajan, the distinguished banker has himself put a lid to the entire controversy.

Rajan has confirmed to his RBI colleagues that he will be going back to academia after the end of his term on September 4. Rajan in his letter said work on containing inflation, cleaning bank books not over but he has decided to go after 'due reflection' and 'consultation with the government'. Rajan clarified that he is always open to serving his country and wished his successor luck.

Rajan was increasingly under attack from BJP MP Subramanian Swamy who said that the former IIT-IITM alumnus is 'mentally not an Indian' Swamy in his letter to PM had said that he is “shocked at the wilful and apparently deliberate attempt by Dr Rajan to wreck the Indian economy”. Swamy also said, “the concept of containing inflation by rising interest rates is disastrous”.

Although BJP had distanced itself from Swamy's comments, it will be open to speculation if Rajan's decision was affected by Swamy's tirade. Rajan though, even in his farewell letter, emphasised on how much the economy has changed under his regime. Rajan said, " A new inflation-focused framework is in place that has helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time. We have also been able to cut interest rates by 150 basis points after raising them initially. This has reduced the nominal interest rate the government has to pay even while lengthening maturities it can issue – the government has been able to issue a 40 year bond for the first time. Finally, the currency stabilized after our actions, and our foreign exchange reserves are at a record high, even after we have fully provided for the outflow of foreign currency deposits we secured in 2013. Today, we are the fastest growing large economy in the world, having long exited the ranks of the Fragile Five."