Indian Central Bank Could Come Under Pressure From New Government

A confrontation may be on the cards between India’s prominent central bank chief and the Bharatiya Janata Party (BJP) that is widely tipped to form the country’s next government.

Media reports suggest Reserve Bank of India (RBI) Governor Raghuram Rajan, a former chief economist at the International Monetary Fund, may come under political pressure to pull back from a hawkish inflation stance from a government led by the BJP’s Narendra Modi.

Strategists in the BJP suggest they would prefer to have their own man at the head of the RBI, Reuters reported last month.

And if exit polls are anything to go by, Friday’s results from the five-week long general election will deliver a majority for the BJP-led National Democratic Alliance.

“Last week we saw a statement from Rajan saying that setting monetary policy is his work and that he will do it independently,” said one India-based economist, who declined to be named. “These debates always happen before an election. Still, let’s not forget this is an RBI governor that comes with lots of experience, so whoever forms the next government will not just push for abrupt changes.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza