With a Modi led Government turning into a high probability scenario, experts have now started speculating about the economic policy decisions the new Government will take. And perhaps top on this list is the future of the RBI Governor Raghuram Rajan. Experts are of the view that the dapper Rajan could be some sort of a misfit in the Modi regime. Simply because his approach seems at odds with the economic think tank at BJP. Rajan has given enough indications of his hawkish stance towards tackling inflation. BJP on the other hand appears keener to see rates softening in order for their development agenda to get fulfilled. Well, we don't know what the outcome of this likely confrontation is going to be.
However, it will be sad for the country if Rajan falls out of favour. For the simple reason that if we need to see a sustainable development, then inflation has to be brought under control first. And one of the most effective tools with which this can be achieved is interest rates. Rajan's policies cannot be the cause for our poor economic state. It is the bad policy decisions that got us where we are. We therefore need to go back to a sustainable inflation level of 5%-6%. Until then at least, rates need to be kept at elevated levels. And it's important that Rajan is there at the steering wheel when this happens.
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