What now for the RBI?
There are eleven weeks before Raghuram Rajan vacates his office at the Reserve Bank of India (RBI). Even as the heated battles about his decision to not seek a second term rage on, there is also the more practical task of steering the Indian economy through what could be a volatile time.
The dollar deposits that were pulled in during the defence of the rupee in 2013 have to be repaid in September. RBI expects at least $20 billion to leave the country. It has bought forward dollars in anticipation. US Federal Reserve chairperson Janet Yellen has recently signalled that there could be two rate hikes this year. And the vote on whether Britain is to stay in the European Union is just around the corner.
These global risks cannot be wished away. Rajan is on his way out. The Modi government must quickly announce who is to succeed him so that the markets are convinced someone capable will be at the helm. After all, it is just an administrative decision.