Star economist takes over India's central bank amid storm
Former IMF chief economist Raghuram G Rajan (R), addresses the media in New Delhi on February 27, 2013. He is set to take over as head of India's central bank on Wednesday.
Rajan, a former IMF chief economist, replaces Duvvuri Subbarao as governor of the Reserve Bank of India (RBI) which has been battling to halt the plummeting rupee amid a sharp economic slowdown.
Rajan was due to arrive at RBI headquarters in the financial centre Mumbai on Wednesday for a handover from Subbarao, the bank said in a statement, before taking charge operationally on Thursday.
Rajan inherits an economy struggling with a record current account deficit, a currency which has lost up to a quarter of its value against the dollar this year and annual growth at its weakest in a decade.
Investors will be looking to Rajan, one of the few economists who warned that sub-prime lending could lead to calamity ahead of the 2008 crisis, to introduce policies to calm jittery markets and stabilise the rupee.
"It would be unfair to expect magic from one person," Siddhartha Sanyal, chief India economist with Barclays Capital said.
"But he is well-equipped to deliver the best one can, given his credentials," Sanyal said.
The rupee traded at near record lows of 68.26 to the dollar in early trade on Wednesday and has been forecast by Deutsche Bank and Standard Chartered to slide to 70 in coming months.
Analysts have raised fears India could face a crunch of the sort it suffered in 1991 when a foreign exchange-strapped government had to pawn its gold for an International Monetary Fund (IMF) bailout.
Rajan, who left his post as a professor at the prestigious University of Chicago's Booth School of Business and returned to India last year, has cautioned against expecting too much from his appointment, saying there are no "quick fixes".
"No one can doubt the country's promise," Rajan, 50, said after being named in early August to the post, but he added, "there is no magic wand to make the problems disappear instantaneously".
India's economy grew by 4.4 percent in the first three months of the fiscal year, the slowest quarterly expansion since 2009, figures released on Friday show. Annual growth is running at a decade-low of five percent.
The government is desperate to kickstart growth ahead of elections due by May next year.
Just days before retiring, Subbarao, who has spent five years as RBI governor, blamed the government for failing to reduce the gaping current account deficit, hurting the rupee further and leaving the country vulnerable to an economic crisis.
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