India cuts shortlist for
new central bank chief to four
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[June 27, 2016]
By Douglas Busvine and Rupam Jain
NEW DELHI (Reuters) - The Indian government
has narrowed its list of candidates to become the next governor of the
Reserve Bank of India to four, a senior official told Reuters, as it set
in motion the process of naming a new Monetary Policy Committee (MPC).
The moves seek to ensure policy continuity and reassure domestic and
global investors after RBI chief Raghuram Rajan shocked markets 10 days
ago by announcing he would not seek reappointment in September.
Rajan, 53, had been accorded rock-star status by markets for defusing a
currency crisis, lowering inflation and winning parliament's approval to
set up the MPC which will set interest rates.
Yet the former IMF chief economist had come under attack from right
wingers in Prime Minister Narendra Modi's ruling party, with friends and
colleagues saying this contributed to his decision to make an early
exit.
Modi put down detractors who had cast doubt on Rajan's loyalty: "Raghuram
Rajan's patriotism is no less than any of ours," he told Times Now news
TV in an interview, saying his experience of working with Rajan had been
good.

The list of candidates to replace Rajan has been whittled down to four,
the official said: current Deputy Governor Urjit Patel, former deputy
governors Rakesh Mohan and Subir Gokarn and State Bank of India <SBI.NS>
Chair Arundhati Bhattacharya.
None has commented, though media have reported Bhattacharya may get a
one-year extension in her current job.
Analysts said a lack of transparency over the selection process was a
worry, and it would be important to ensure Rajan's successor is strong
enough to uphold the RBI's autonomy.
"For the continued credibility of a strong and autonomous institution
like the RBI, I hope the next governor is someone independent like Rajan,
and not more pliable to the government,"
said Shumita Sharma Deveshwar, co-head of India research at Trusted
Sources, a macro advisory firm.
SEARCH OPERATION
The official, and another from Modi's office, said Rajan should join the
search panel to appoint three external members of the new six-member MPC.
This process was kicked off on Monday by the notification of changes to
the act governing the RBI that were recently passed by parliament.
The objective was to ensure that the MPC is constituted as soon as
possible, before the appointment of Rajan's successor, both officials
said, speaking on condition of anonymity due to the sensitivity of the
matter.
"We are very hopeful the present governor will be a member of this
search committee," the first official said, adding that if all goes well
the new panel would be formed by Aug. 1.

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Reserve Bank of India (RBI) Governor Raghuram Rajan delivers a
lecture at Tata Institute of Fundamental Research (TIFR) in Mumbai,
June 20, 2016. REUTERS/Danish Siddiqui

If that timetable holds, it would mean the MPC will be in place for the
last policy meeting chaired by Rajan in August.
It would be desirable if Rajan is on the selection committee "given his
international experience and the fact that the new monetary policy
framework became operational under his intellectual leadership", said
Rupa Rege Nitsure, group chief economist at L&T Financial Services in
Mumbai.
Rajan's decision to stand down followed weeks of attacks from the far
right of Modi's Bharatiya Janata Party (BJP), led by maverick politician
and Harvard-educated economist Subramanian Swamy.
Swamy memorably described Rajan as "mentally not fully Indian" in an
open letter to Modi, demanding the governor's immediate termination. He
was venting views widely held in the Hindu-nationalist umbrella group,
the Rashtriya Swayamsevak Sangh, to which Modi's party is affiliated.
A senior RSS source expressed support for the slate of candidates,
however, indicating the group would prefer a more low-profile,
Indian-educated governor than the outspoken Rajan but was not bent on
forcing a more radical policy shift.

Under the finance bill passed this year, three members of the MPC would
be RBI insiders, headed by the governor who would have the casting vote
in the event of a 3-3 split.
Three external members would be chosen by a search committee comprising
Modi's cabinet secretary, the RBI governor, a top finance ministry
bureaucrat and three outside experts chosen by the government.
The RBI said it was not in a position to comment.
(Additional reporting by Suvashree Choudhury, Neha Dasgupta, Rajesh
Kumar Singh and Malini Menon; Editing by Kim Coghill and Nick Macfie)
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