New RBI governor Raghuram Rajan

In his first address as RBI governor today, Raghuram Rajan was clear that he is working to a plan. He unveiled a bold, new Reserve Bank of India with a slew of reforms, many of them focused on "protecting the value of money" and emphasised that while the Indian economy faced challenges, it was fundamentally strong. (Read full statement)

He highlighted as top priorities, the stability of the rupee and "low and stable levels of inflation", and promised that his policies would lead to "faster, broad based inclusive growth leading to fall in poverty".
In the crisp delivery of promises was also this: "Some of my actions will not be not looking to garner Facebook likes."

Analysts said they had expected the 50-year-old academic and celebrated economist to do his homework, but had not expected him to detail so comprehensive a plan. Markets, they said, were expected to react positively after many dark days.

Dr Rajan, who takes over as RBI chief as the country battles a plummeting rupee and decade-low growth, said he saw a "bright future".

He stressed on the importance of effective communication, which his predecessor D. Subbarao was accused of neglecting, and said, "The RBI should be a beacon of stability... the public should have a clear idea of the central bank... key to all this is communication."

Announcing quick action to support the Indian rupee, which has seen a steep 20 per cent fall in recent week, the new governor said the RBI will allow importers to rebook 25 per cent of cancelled forward contracts.

The central bank would also allow the introduction of cash settled 10-year interest rate future contracts, he added.

Dr Rajan said the government would look to reduce investments by banks in government bonds "in a calibrated manner". The RBI, he said, would work together with the government and market regulator SEBI to steadily liberalise markets.

A major part of Dr Rajan's speech was focused on shoring up investor confidence. He said the RBI would push for more settlement in rupees for which India will have to open its markets further.

Mr Subbarao said earlier on Wednesday that his successor is in for a bumpy ride. Dr Rajan takes charge as some analysts warn that the Indian economy could be heading for a meltdown, with a record current account deficit and a currency which has lost up to a quarter of its value against the dollar this year.

With inputs from agencies


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