Rajan: New role
New Delhi, Nov. 3: Prime Minister Manmohan Singh today named Raghuram G. Rajan, former chief economist of the International Monetary Fund and the architect of a blueprint for financial sector reforms in India, as his honorary economic adviser.
Rajan had submitted his draft report in April that suggested measures to turn India into a financial powerhouse in the next five years.
Sources said the Prime Minister had liked the report so much that he decided to induct Rajan as one of his consultants.
Rajan is a finance professor at the University of Chicagos Graduate School of Business. He is expected to give valuable inputs on how to tackle the global financial crisis and deal with the problems that the Indian financial sector now faces.
Most members of the Prime Ministers economic advisory council are respected macro-economic policy experts but do not necessarily understand all the intricacies of the financial markets.
A statement from the Prime Ministers Office said Rajan had been appointed as an honorary economic adviser to Singh and would enjoy the rank of a secretary.
Rajans status is lower than that of the members of the council but his advice on financial strategy is likely to carry more weight at a time when banks are facing a cash crunch.
The only real expert on financial markets in the council was former RBI governor C. Rangarajan.
However, he has left the panel and become a member of the Rajya Sabha. Sources said the Prime Minister would, continue to consult Rangarajan.
The former RBI governor attended a series of meetings that finance minister P. Chidambaram held last week before the RBI cut the repo rate and reserve ratios for banks on Saturday.
This is a difficult time to propose financial sector reforms in India. The near meltdown of the US financial sector seems to be proof to some that markets and competition do not work. This is clearly the wrong lesson to take from the debacle, Rajan wrote in his introduction to the draft report.
Rajan will bring ample experience in financial sector management as he was the chief economist with the IMF.
He was the first person of Indian origin chosen by the IMF for the top job. Rajan is not only the youngest individual to hold this position, but also the first from a developing nation.