MUMBAI: India’s outgoing central bank chief insisted he had laid the foundations for sustainable growth in the world’s best-performing major economy after keeping interest rates on hold in his final policy review on Tuesday.
Raghuram Rajan, who caught the government off guard in June by announcing he was stepping down in September, said he was unfazed by his critics and that the only thing that mattered was the impact of his decisions.
The Reserve Bank of India (RBI) governor was speaking to reporters after announcing the outcome of the last monthly policy review before he returns to academia next month.
After confirming that he was keeping rates on hold to check inflation, Rajan staunchly defended his time in office during which he has faced severe criticism from allies of Prime Minister Narendra Modi.
“I think snap judgements either by critics or by supporters aren’t really what matters,” Rajan, who is a former International Monetary Fund (IMF) chief economist, told reporters in Mumbai.
“What matters is how this plays out in the longer run for stronger and sustainable growth for the country, for job creation, for our movement into the middle income.
“In our view, the measures we have taken in the RBI were and are justified given the conditions that we have. People can have different judgments.”
Since Rajan’s appointment in 2013 under the previous center-left government, India has enjoyed growth rates that have eclipsed other major economies.
India’s economy expanded by 7.9 percent in the fourth quarter of 2015-16, the fastest of any major economy, while inflation has fallen from double-digit levels to under six percent on his watch.
But although interest rates are at their lowest level since 2011, there have been tensions with the ruling Bharatiya Janata Party (BJP) which has been pushing for deeper cuts, saying these would boost growth further.
The BJP lawmaker Subramanian Swamy called Rajan an idiot earlier this year and told him to “go back to Chicago” where he used to be a finance professor.
Most economists however have lamented the prospect of the departure of the man who famously predicted the 2008 global financial crisis.
Rajan had been widely expected to hold the benchmark repo rate – the level at which it lends to commercial banks — at 6.50 percent on Tuesday. The bank last cut rates by 25 basis points in April.
In his address to the media, Rajan said he was confident there would be further falls in inflation after the level inched upwards to 5.77 percent in June, but warned that risks remained.
“Until we see the full effects of the monsoon, it would be premature to declare victory,” he said.
The monsoon currently sweeping India has brought relief to farmers who rely on the rains for their crops, but food prices are still high in rural areas where millions of poor have been hit by a crippling drought.
Some experts believe the central bank can cut rates in the next monetary policy announcement in October after a new governor is appointed.
The government is yet to announce Rajan’s successor with current RBI deputy governor Urjit Patel reportedly on the shortlist, along with economist Subir Gokarn, who served as RBI deputy from 2009 to 2012.
Rajan took the RBI reins in September 2013 at a time when India’s economy was struggling with a ballooning current account deficit, a plummeting currency and decade-low economic growth.
Many economists have hailed his line on rate cuts for bringing down India’s inflation.
“Overall, Rajan followed a hawkish approach to rate cuts between 2013-2014 and eased it out in the later stages. He has been very accommodative during his tenure and did what was good for the economy,” Arun Singh, economist at Dun and Bradstreet, told Agence France-Presse.
The government last week formally adopted Rajan’s consumer price inflation policy of four percent in a bid to help moderate future price rises.