Appeasement towards few should be Rajan’s policy

While there is cautious optimism on the appointment of Raghuram Rajan, the head of the Reserve Bank of India (RBI), he has warned not to expect popular measures or decisions that will win him facebook ‘likes’.

It is the best way for Rajan to begin his term. Appeasement towards few should be his mantra under these trying circumstances. Win the markets and the people over and the rest will follow suit. Importantly, however, he needs to surround himself with a team of able advisors. The falling rupee will have to be vigorously defended. More reforms should be earmarked in the financial sector to ensure that capital inflows from non residents do not stop. This could help boost the current account deficit which is threatening the coffers of the exchequer.

The RBI needs to stand firm to restore economic stability. Clarity of thought and action are areas that will need to be addressed. It must retain the ability to surprise the markets. Maintaining monetary stability is the principal task of the central bank and this must be looked into as well, especially as the US Federal Reserve is scheduled to meet on September 17-18 to announce new measures.

Reducing inflation is another area which needs examining. This will win him gold stars with India’s middle income group and families who are the pillars of the society.