| Reddy: Mr Rupee’s here
New Delhi, July 18: Yaga Venugopal Reddy, currently executive director of the International Monetary Fund (IMF), will be the new governor of the Reserve Bank of India.
He succeeds Bimal Jalan, 62, who had informed the government that he wanted to step down before his term expired. Jalan is believed to be lobbying for a Rajya Sabha seat.
Reddy’s appointment as the top banker in the country has been cleared by the Appointments Committee of the Cabinet chaired by Prime Minister Atal Bihari Vajpayee.
Late this evening, the notification relating to Reddy’s appointment was issued by the department of personnel under the home ministry, breaking with a tradition where the finance ministry has the honour of naming the country’s central banker.
However, the date on which Reddy will assume his new assignment has not yet been fixed.
Reddy, who is 60 years old and a serious diabetic, had to beat off stiff competition for the post from Vijay Kelkar, advisor to finance minister Jaswant Singh, and S. Narayan, former finance secretary and now a senior bureaucrat in the Prime Minister’s Office.
The new RBI governor, who was a deputy governor at the central bank in charge of monetary policy before he went to the IMF last August, is a highly regarded banker. Jalan and he had steered India safely past the reefs when the Asian financial crisis erupted in the mid-nineties.
Reddy is a known reformist but has displayed great caution in calibrating the relaxation in the country’s currency controls. With foreign exchange reserves currently at over $ 83 billion, Reddy may find that he has greater leeway in taking bold measures on this front than he has ever had.
He earned the sobriquet of Mr Rupee when he forced the currency to walk his talk with his famous speech at Goa in August 1997 when he said the rupee was overvalued on a trade-weighted basis. That comment triggered a slide in the rupee which tumbled from 35.75 to a dollar to Rs 39.22 by the end of the year.
In March 2002, Reddy came up with a radical proposal when he suggested the formation of a Gold Exchange to develop the precious metals and integrate it with the financial markets. The idea was to allow futures trading in gold because he felt there was “considerable merit in following the global practice of integrating the gold markets with the financial markets.”
The acid test for Reddy will be to keep interest rates low enough to kickstart the sputtering economy even as he tries to bring about some fiscal rectitude in government finances.