As finance minister, Chidambaram to name Raghuram G Rajan chief economic adviser

NEW DELHI: Former International Monetary Fund (IMF) chief economist Raghuram G Rajan is set to take over as government's chief economic adviser (CEA). Although the decision is learnt to have been endorsed by Prime Minister Manmohan Singh, an announcement is expected after home minister P Chidambaram moves to the finance ministry in the next few days.

Chidambaram is likely to take charge by August 5 with indications that power minister Sushil Kumar Shinde, who is tipped to be the Leader of Lok Sabha, is the frontrunner to move into the home ministry.

There is no clarity on who might replace Shinde in the power ministry in case the veteran is, indeed, shifted to home ministry. Urban development minister Kamal Nath, corporate affairs minister Veerappa Moily and rural development minister Jairam Ramesh are mentioned as the likely candidates for the critical infrastructure ministry.


Government has already secured the clearance from the regulatory bodies for appointing Rajan as Kaushik Basu's successor.

Government sources said, the professor at the Chicago University Booth School of Business, has academic commitments in the US lasting up to the end of the current semester which is nearly two months away. Basu's extended term ends on Tuesday, requiring the government to speed up the CEA's appointment.

Singh's decision to wait for a new finance minister to appoint the new CEA confirms that the PM is holding charge of the crucial ministry only as a stop gap arrangement. On July 11, TOI had reported that home minister P Chidambaram is expected to return to the finance ministry early next month.

Sources said a top deck reshuffle is in the offing in North Block which houses the finance ministry, with Arvind Mayaram's return to the department of economic affairs being seen as the prelude.

Rajan's appointment will be another strong signal to the investor community that the government is open to fresh ideas, particularly in the financial sector.

Rajan did not respond to TOI's e-mail seeking his comments on the imminent appointment.

A Ph.D in economics from Massachusetts Institute of Technology (MIT), Rajan is an electrical engineer from IIT- Delhi and learnt the ropes of management at the prestigious IIM-Ahmedabad. He is widely believed to have predicted the 2008 financial crisis at Jackson Heights where central bankers from around the world had converged - something that he discussed in his last book, Fault Lines: How Hidden Fractures Still Threaten the World Economy. He is no stranger to the Indian political economy and Fault Lines dealt with the issue of crony capitalism.

Besides, he has headed the government's Committee on Financial Sector Reforms, which submitted its report in September, 2008, that not only dealt with issues such as developing a stronger bond market and allowing derivatives trading for companies to hedge their interest rate and currency risks but also went into the need to deepen the banking system so that it could reach a larger section of the population.

Rajan was also appointed economic advisor to the PM, an honorary job, at the height of the 2008 financial crisis.