Analysts optimistic of new RBI Governor pulling India out of crisis

MUMBAI: The appointment of Raghuram Rajan as the 23rd governor of the Reserve Bank of India will help the country's economy to pull out from the current economic slowdown and also bring better coordination between the central bank and the North Block, feel analysts.

"The timing of Rajan's appointment, by distracting attention from recent developments and offering the market hope of greater clarity, is good," Robert Prior-Wandesforde, director (Asian Economics Research), Credit Suisse said.

Rajan, who is currently the chief economic advisor at the Ministry of Finance, will succeed current governor D Subbarao, whose term gets over on September 4, 2013.

"His (Rajan's) experience at the Finance Ministry should enable better co-ordination between the RBI and the government," said Sonal Varma, economist at Nomura Financial Advisory and Securities.

Varma feels that Rajan's knowledge of the financial sector, global economy and emerging markets should be of great advantage to the country at this time of difficulty.

Rajan, the former chief economist at International Monetary Fund (IMF), is considered as one of the first to have predicted the 2008 financial crisis three years before its coming.

The confidence of the market in Rajan, as the new RBI governor, was evident from the fact that rupee which touched a lifetime low of Rs 61.80 on Tuesday recovered after the announcement and closed at 60.77 against the dollar, experts said.

"The rupee had touched a fresh record low against the dollar around 61.80 Tuesday before gaining substantial ground soon after the announcement," Radhika Rao, economist at DBS Bank, said.

Rajan will be facing challenging tasks of slower growth, high inflation, depreciating rupee and widening current account deficit.