Can New RBI Chief Raghuram Rajan Save the Rupee?

His qualifications are pretty impressive too. Rajan is a BTech in Electrical Engineering (gold medalist) (1985), from IIT Delhi. He also holds a Postgraduate diploma in Business Administration (gold medalist) (1987), from IIM Ahmedabad. And he has a PhD in Management (1991), from MIT.

In 2003, Rajan was appointed the youngest-ever Chief Economist (official designation: Economic Counsellor and Director of Research) at IMF, where he served till December 2006. In 2008, Prime Minister Manmohan Singh appointed Rajan as an honorary economic adviser. Then, in 2012, Rajan was appointed the Chief Economic Advisor to the Ministry of Finance.

Economists & industry leaders have cheered Raghuram Rajan’s appointment as RBI Governor. Deepak Parekh of HDFC said that Rajan is ‘ a very good’ choice for the post and has good understanding of the global monetary policy system.

“It’s not just his impressive haul of alphabets: IIT, IIM-A, MIT. Also his experience and intellectual integrity. Raghu’s made of the ‘right stuff’,” tweeted Anand Mahindra, Chairman of Mahindra Group.

C Rangarajan, Chairman of the PMEAC, in an interview with ET Now, also said that Raghuram Rajan is an ‘excellent choice’ for the RBI Governor’s position.

Siddhartha Sandal, Chief India Economist at Barclays Bank, said it’s very unlikely that any single appointment can prove to be a game changer in today’s difficult situation, but Rajan, a former Chief Economist with the International Monetary Fund, was “an excellent choice”.

Mr. Rajan is well aware that there is no easy solution to the challenges he will be managing during his three-year tenure. And these challenges will be many. The rupee is at historic lows, sinking to 61.81 to a dollar on August 6, threatening to further stoke inflation. The growth in GDP, at 5 per cent last year, was the lowest in a decade. Business activity across the private sector dipped for the first time in four years in July, with output from both manufacturers and service providers lower than before.

The banking sector is in duress, with non-performing assets rising over 50 per cent for 39 listed banks in 2012-13 and credit growth slowing to 14 per cent from 16.8 per cent in 2011-12. The country’s current account deficit widened to 4.8 per cent of the GDP, compared to 4.2 per cent in 2011-12.

Rajan, born in Bhopal into a Tamil family, is quick to accept the dangers on the steep road ahead. But how will he take on these challenges? Only time will tell.