The popular governor of the Reserve Bank of India, Raghuram Rajan, will step down when his term ends in September to return to academia, he wrote in a letter to colleagues published on the central bank’s website yesterday.
Speculation has been rife in the Indian media about whether the former IMF chief economist intended to seek a second term as RBI head and whether the government would grant it.
In the letter, Rajan reflected on his achievements as governor, saying he believed the bank had delivered on objectives including lowering the inflation rate, stabilising the rupee and tackling India’s mountain of bad loans.
“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,” Rajan wrote.
“I will, of course, always be available to serve my country when needed,” he stated, thanking colleagues for their “unflinching support”.
Rajan, 53, enjoys a mass appeal not normally associated with a banker, and has been dubbed “rock star Rajan” and India’s
“James Bond”.
But he has faced personal attacks from right-wing MPs in India’s ruling Bharatiya Janata Party (BJP), notably Subramanian Swamy, a media-savvy populist who had called for him to step down.
The former University of Chicago professor said that he planned to return to a life of academia.
“I am an academic and I have always made it clear that my ultimate home is in the realm of ideas,” he said.
Rajan, who famously predicted the 2008 global financial crisis, has been widely credited with bringing stability to India’s economy since his appointment as RBI governor in September 2013.
But he has clashed with Prime Minister Narendra Modi’s Hindu nationalist government over how quickly the central bank should cut rates.
Rajan has slashed interest rates over the past 18 months to their lowest level since early 2011 – but the ruling BJP wanted deeper cuts to boost economic growth further.
Rajan has successfully taken aim at inflation – bringing it down from double-digit levels to 5.8% currently – and has been credited for creating a stable environment for the economy to grow.
Earlier this month he joked with reporters saying that it would be “cruel” to end the intense media speculation over his departure.
Amid the feverish speculation, some names mooted in Indian media as possible candidates to replace the banker were Arundhati Bhattacharya, chairman of State Bank of India and economic affairs secretary Shaktikanta Das.
Urjit Patel, deputy governor of the central bank, has also been named as a possible candidate.
India’s economy expanded by 7.9% in the fourth quarter of 2015-16, the fastest of any major economy.
In a sign of his popularity, tens of thousands of people signed an online petition calling for him to be given a second term.