Dr. Raghuram Rajan, who today took over as the 23rd Governor of Reserve Bank of India (RBI), said that the country's economy was 'fundamentally sound' and had a 'bright future'.
"This is not an easy time, the economy does face challenges. At the same time, India is fundamentally a sound economy with a bright future. Our task today is to build a bridge to the future over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that," he said in his first speech after taking helm of the central bank.
Dr. Rajan, who enters office as the economy struggles with decade-low growth, a record current account deficit and a steep fiscal shortfall, said the primary role of the central bank is monetary stability that is to sustain confidence in the value of the country's money.
"Ultimately this means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or from demand pressures," he added.
Reflecting on some of his proposals in the coming future, Dr. Rajan said that he would push for trade settlement in rupees.
"As our trade expands, we will push for more settlement in rupees. This will also mean we will have to open up our financial markets more to those who receive rupees so that they can invest it back in. We intend to continue the path of steady liberalisation," he said.
Dr. D. Subba Rao, who completing his tenure as RBI Governor today, excluded confidence in Dr. Rajan and said that 'the country could not have asked for a more capable person'.
"The economy is challenged on many fronts. The Reserve Bank has a responsibility of navigating the economy out of the current pressures. The country could not have asked for a more capable person than Dr. Raghuram Rajan to lead the Reserve Bank at such difficult times," he said.
Meanwhile, Indian economy expert Mukesh Anand pointed out that the first and most important challenge faced by the new RBI Governor is to rescue the slipping status of the rupee.
"Especially in the context of India where we have rely more on essential imports than on our exports, it's more likely to work to our disadvantage that we are losing the value of our currency," Anand told media in New Delhi.
"So, in that sense Dr. Rajan will have to work that much harder to bring some stability in the price of the foreign exchange or the price of then Indian rupee," he added.
Dr. Rajan was earlier economic adviser to Prime Minister Dr. Manmohan Singh and headed the committee on financial reforms appointed by the Planning Commission. Dr. Rajan also served as Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago.
He was also a visiting professor for the World Bank, Federal Reserve Board, and Swedish Parliamentary Commission. He formerly served as the president of the American Finance Association and was the chief economist of the International Monetary Fund (IMF).
