In a surprising announcement, Reserve Bank of India (RBI) Governor Raghuram Rajan on Saturday said that he would return to the academic world at the end of his term on September 4, 2016, adding he will always be available to serve his country when needed and asserted that his 'successor' would take the nation to new heights.
Rajan is currently on leave from the Chicago Booth School of Business where he holds the post of Distinguished Service Professor of Finance.
In a statement issued today, Rajan stated that he was a strong 'academic' and had always made it clear that his ultimate home is in the 'realm of ideas'.
"The approaching end of my three-year term and of my leave at the University of Chicago was, therefore, a good time to reflect on how much we had accomplished. I am confident my successor will take us to new heights with your help. I will still be working with you for the next couple of months, but let me thank all of you in the RBI family in advance for your dedicated work and unflinching support. It has been a fantastic journey together!" the statement said.
Rajan, who took the office in September 2013 as the 23rd RBI Governor, stated that the Indian currency was plunging daily, inflation was high and growth was weak and that India was then deemed one of the "Fragile Five".
"In my opening statement as Governor, I laid out an agenda for action that I had discussed with you, including a new monetary framework that focused on bringing inflation down, raising of Foreign Currency Non-Resident (B) deposits to bolster our foreign exchange reserves, transparent licensing of new universal and niche banks by committees of unimpeachable integrity, creating new institutions such as the Bharat Bill Payment System and the Trade Receivables Exchange, expanding payments to all via mobile phones, and developing a large loan data base to better map and resolve the extent of system-wide distress," he said.
Stating he feels proud that the RBI has successfully delivered on all these proposals, Rajan added that a new inflation-focused framework is in place that has helped halve inflation and allowed the savers to earn positive real interest rates on deposits after a long time.
He further said that the Indian currency stabilized after the actions of his team, adding India's 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," Rajan added.
Talking about the RBI's achievements under his leadership, he further said that his team has worked on an enabling framework for National Payments Corporation of India to roll out the Universal Payment Interface, which will soon 'revolutionize mobile to mobile payments' in the country.
"Internally, the RBI has gone through a restructuring and streamlining, designed and driven by our own senior staff. We are strengthening the specialization and skills of our employees so that they are second to none in the world. The integrity and capability of our people, and the transparency of our actions, is unparalleled, and I am proud to be a part of such a fine organization," he said.
Asserting there is still a lot to be done, the RBI Governor stated that inflation is in the target zone, but the monetary policy committee that will set policy has yet to be formed and that international developments also pose some risks in the short-term.
Lauding his team for the achievements, Rajan further said the RBI has worked with the government over the last three years to create a platform of macroeconomic and institutional stability, adding the work they have done will enable them to ride out imminent sources of market volatility like the 'threat of Brexit'.
"We have made adequate preparations for the repayment of Foreign Currency Non-Resident (B) deposits and their outflow, managed properly, should largely be a non-event. Morale at the Bank is high because of your accomplishments. I am sure the reforms the government is undertaking, together with what will be done by you and other regulators, will build on this platform and reflect in greater job growth and prosperity for our people in the years to come," Rajan said,
Expressing confidence that his successor will take India to new heights, he stated that he will still be working with the central bank for the next couple of months and thanked the RBI family for their dedicated work and unflinching support while asserting that it has been a 'fantastic journey'.
Bharatiya Janata Party (BJP) leader Subramanian Swamy had last month triggered speculation by asking the Centre to deny Rajan a second term, saying his hawkish policies have ruined the Indian economy.
Swamy had in his letter to Prime Minister Narendra Modi accused Rajan of 'harming the nation's economy' and claimed that the latter was acting more as a disrupter of the Indian economy than the person, who wants the Indian economy to improve.
Swamy had then said Rajan is in India on a Green Card and is, therefore, 'mentally not fully Indian.'
However, Infosys founder Narayan Murthy later added his voice to the chorus of support for Rajan, saying the central bank chief should be offered two more terms in recognition of his track record in steering monetary policy.
