Analysts see no merit in Rajan’s ‘no interest’ for 2nd term

Mumbai, June 1 (IANS) Even as Reserve Bank of India (RBI) Governor Raghuram Rajan’s office declined to respond to queries over a media report on his lack of interest for a second term, analysts saw the development as mere speculation, lacking merit.

Leading Bengali daily Anandabazar Patrika said Rajan has told the government that once his term ends, he would like to return to the US. Quoting sources close to him, the daily said he plans to join a US university and pursue research on the Indian economy.

“We don’t comment on speculation,” was the single-line comment over phone to IANS by Alpana Killawala, Principal Adviser at the Reserve bank of India, who also oversees media relations.

Some analysts ascribed the sharp movement in the currency market on Wednesday to the report, while others brushed aside the notion.

“The rupee witnessed volatility after a local-language newspaper reported that central bank governor doesn’t want an extension of his term. But the Indian market showed no such reaction, indicating there might not be merit in the news,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.

“In fact, only last month, Rajan indicated that he wants to continue as Reserve Bank Governor. Indian market would have reacted sharply but since market was flat, we can give less credence to this news,” Desai said.

The Indian rupee weakened by 20 paise during the day’s trade. It closed at 67.45-46 against a US dollar from its previous close of 67.26 to a greenback.

Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, said that Wednesday’s rupee fluctuation had more to do with the yuan than the speculative news about the Reserve Bank governor.

Otherwise, he said, Rajan had proved extremely useful to the country, especially in these difficult times.

“Rajan and (Prime Minister Narendra) Modi combo has been a game-changer for the Indian economy and financial markets. Rajan’s relentless pursuit to anchor inflation expectation and strengthen the banking system has been a major support for rupee,” Banerjee said.

Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, had a similar take.

“Rajan’s term, in fact, has overseen a transition in the Indian economy as well as change in government. Indian debt and equity markets had not only responded positively but also had become accustomed to anticipate measures aimed at economic stability,” James said.

“Undoubtedly, a change in guard at the RBI helm is certain to ask questions, but is less likely to spark a knee-jerk reaction. Further, it is hard to say that reports of his not getting an extension led to today’s lacklustre trades.”

The Reserve Bank governor recently came under a strong attack from BJP leader Subramanian Swamy who demanded that he be sacked. But Prime Minister Modi had indicated that he would want Rajan to continue, Anandabazar Patrika said.

Several leaders in the BJP have questioned the logic of Swamy’s demand. It has been speculated he was being supported by party President Amit Shah. The daily also quoted “informed sources” as saying Modi had supported a two-year extension for the RBI governor.

Rajan also found support in union Finance Minister Arun Jaitley who has told the Prime Minister, according to the daily, that if the governor is sacked, it would send a wrong message around the world.

Rajan has also been supported by several industrialists and think tanks around the world who believe that he is one of the finest economists. They have pointed out that Rajan had stuck to the path of reforms ensuring that India moved ahead on a growth trajectory.



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