Economists see RBI’s Rajan in office for another term, despite odds

Raghuram Rajan is still the best bet as India's central bank governor and he could continue for a second term after his tenure ends in September, despite his stance against bragging about even small gains of the economy.

This was the view taken by most economists participating in a survey conducted by Bloomberg on Thursday, following criticism from several government officials over Rajan's view of India's economic growth in a recent media interview.

Thirteen of 15 economists said he'd get an extension while one said it's unlikely and another said he was not sure of what the government might do.

''At this juncture he is steering both the monetary policy framework and the banking system towards greater transparency, credibility, efficiency and stability,'' Sujan Hajra, a Mumbai-based economist at Anand Rathi Financial Services Ltd., said of Rajan. ''Given this unfinished agenda and also the fact that all of the last four governors served five-year terms, we expect Governor Rajan to get a two-year extension.''

Rajan's future is becoming a point of speculation in India, after his recent controversial statements over India's growth dynamics.

Since taking charge of the central bank in 2013, the former International Monetary Fund chief economist has led the push for an inflation target, a monetary policy committee and moves to clean up the balance sheets of state-run banks.

He has often been critical of the functioning of the system and the way problems are handled even he has been earnest in his efforts to find solutions to nagging problems in the financial sector.

Rajan may be right as well and most of those in the government as well know that while India is obviously the world's fastest-growing economy that is more due to the Chinese slowdown than due to any pump-priming by the government.

And that is why Raghuram Rajan is right, both in terms of what he said about India being andhon mein kana raja (in the land of the blind, the one-eyed man is king).

Rajan's statement was criticised by junior finance minister Jayant Sinha and commerce minister Nirmala Sitharaman, who said Rajan should have chosen his words more carefully.

"Growth figures are not enough, we need to know where our economy stands and its position among other economies, especially when we compare ourselves with China or even smaller Asian countries like Japan or Korea."

However, despite occasional tensions over the governor's policy stance, Prime Minister Narendra Modi's government has more or less endorsed Rajan's moves.

Rajan had at least once strayed into the realm of politicians when in a speech last year he pointed to the need for tolerance in multicultural India. His comments also drew a rebuke from a leading member of the ruling Bharatiya Janata Party.

Rajan has also been criticised by ruling party politicians for, what they say, denigrating India's success and denying the government credit for its hard work.

Speculation is also rife that Rajan would rather opt to leave at the end of his term. Speculators have also listed possible replacements for Rajan, which include Urjit Patel, Rajan's deputy at the Reserve Bank of India; Arundhati Bhattacharya, chairman of the State Bank of India, the nation's largest state-run lender and the biggest loss-maker among all banks; Shaktikanta Das, economic affairs secretary in the finance ministry; and UK Sinha, chairman of the Securities & Exchange Board of India.

However, reports quoting finance ministry officials said it was too early to say anything on Rajan's extension.