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New Head of RBI – What to Expect?

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Raghuram Rajan (new head of rbi) is one of the most googled keyword of late. And it has to be since the position that he will be occupying is not an ordinary one. It gains even more importance in the struggling state that the country is in now. India holds the history of combating an economic disaster and that’s primarily because of the wonderful policies of the Central Bank. However, we have lost the ground now and are surrounded by economic monsters. Is Raghuram Rajan the man for the crisis? Many believe so, because of the positions that he has held till now. He is a former International Monetary Fund (IMF) Chief Economist.

Let us look at some of the challenges that he will be facing at work and what a common man can and cannot expect from him:

1)     Falling Rupee – Rupee has been on a falling spree and of late it has touched the lowest level of 61.30 against the dollar. Experts feel it could further depreciate. Getting back the Rupee to a decent level could be the biggest challenge for Mr. Raghuram Rajan. Protecting the Rupee against the speculation in currency market is also needed. In case the rupee is not controlled, we all know the repercussions.

2)     Rising Inflation – Though WPI has eased in the past few months, CPI still hovers @ 10% according to latest figures. Inflation is linked to food and fuel prices. Though CPI figures least matter to the common man, what matters is the prices of essential commodities and fuel. Government and RBI have ben working together to get this down. Mr. Rajan needs to get his hand on this soon.

3)     Sliding Growth – What needs to fall has been rising and what needs to rise has been falling. GDP growth is linked to multiple factors such as employment, infrastructure, etc has not been great. It could be due to slowing reforms leading to a policy paralysis. Few years back, it was close to double digits; it is just about half of it now. Lagging India needs to be brought back to Booming India.

Apart from the above challenges, Mr Rajan would also encounter numerous challenges such as banking reforms and licenses, tackling twin deficits of the country, etc. He is expected to maintain a growth stance and hence interest rates could reduce in the coming months. What can be expected from him is that he is quite capable of tackling all the above said challenges and many more to come. What cannot be expected from him is to resolve all these immediately. He himself has agreed that he doesn’t have a magic wand to solve all of India’s troubles.

Let’s wish Mr. Raghuram Rajan all the best in the path towards creating a long term growth story through better policies for India.

About the Author:

A.V.Suresh is our in-house Financial Planner and a personal finance enthusiast. He is a Certified Financial Planner (CFP) and also has an MBA in Finance. He can be reached at expert@investmentyogi.com


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