NEW DELHI – The governor of India’s central bank said Saturday that he will not seek a second term and will return to academia when his term ends in September.
Raghuram Rajan’s announcement ends speculation over whether Prime Minister Narendra Modi’s government will give him another three-year term with India’s economy growing at an impressive 7.5 per cent. That made India the world’s fastest-growing major economy, overtaking China’s growth in the January-March quarter.
Rajan was appointed the Reserve Bank of India’s governor by the previous Congress party government three years ago. Some leaders of Modi’s Hindu nationalist party recently criticized him for adopting a hard line against inflation despite pressure to cut interest rates to push India’s economic growth.
Subramanian Swamy, a lawmaker from the ruling Bharatiya Janata Party, has attacked Rajan for his hawkish stance on interest rates, and questioned whether Rajan was “mentally, fully Indian as he holds a U.S. green card,” according to the Press Trust of India news agency.
Since becoming head of the central bank, Rajan has been on leave as a professor of finance at the University of Chicago.
In a message to his bank staff on Saturday, Rajan said that when he took office, the Indian currency was plunging daily, inflation was high and growth was weak.
His agenda for action, including a new monetary framework and raising of foreign exchange reserves, helped halve inflation and allowed savers to earn positive real interest rates on deposits after a long time, he said. “We have also been able to cut interest rates by 150 basis points after raising them initially,” he added.
India’s inflation rate averaged 7.7 per cent from 2012 through 2015, reaching an all-time high of 11.16 per cent in 2013 and a record-low 3.69 per cent in July last year, according to government statistics.
Rajan, who was chief economist at the International Monetary Fund from 2003 to 2007, said in his message, “I am an academic and I have always made it clear that my ultimate home is in the realm of ideas.” He also said he “will, of course, always be available to serve my country when needed.”