Athree-year term is too short for the head of Indi a’s central bank because a longer tenu re will enable the incum bent to do bet ter job, RBI go vernor Raghuram Rajan told a parliamentary panel on Thursday while citing the example of the US federal reserve chairman who enjoys a four-year tenure.
In an interaction lasting more than three hours, Rajan told finance standing committee members that the UK may not be in a hurry to initiate a formal break with EU postBrexit and though the UK vote had implications for India, the country’s growth prospects remain healthy despite global uncertainties.
On the RBI governor’s term, Rajan pointed to the US example when asked if a five-year term was preferable. The US Fed chairman and vice-chairman, in addition to serving as members of the board, serve four-year terms and can be re-appointed, with some like Alan Greenspan, who was chairman from 19872006, enjoying long tenures.
Rajan recently ruled himself out for a second term after considerable speculation over his re-appointment.
In his presentation to the committee, the governor noted that despite a deceleration in job creation in April-December, 2015-16, a robust labour market is predicted for the first quarter of 2016-17. “It is noteworthy that net employment outlook for India is significantly higher than all other emerging market economies,“ it said.
The governor also welcomed the monetary policy committee that will soon begin functioning and will be charged with deciding on interest rates, saying the pressure on one individual (the governor) will reduce.He also said the MPC will ensure a continuity in poli cy even when there is a change of governor.
Noting that the governor has the casting vote in case of a tie in the committee, he light-he artedly com mented that the head of the central bank was expected to be able to convince his deputies who are members of the MPC.
On Brexit, the governor’s assessment was that there is now a sense of uncertainty among those who supported the `Leave’ campaign about the future and, in response to a query , said the developments do not necessarily benefit China.
On the issue of big and wilful defaulters, he said such individuals have the capacity to hire expensive lawyers and can dodge the law but added that this was the case in most places.
Rajan defended the central bank against the common criticism that it has been slow in reducing rates, pointing out that public sector banks (PSBs) have been risk averse, holding back lending in micro-credit, agriculture, non-food sectors.