The Union government yesterday appointed Planning Commission member-secretary Bimal Jalan as the new governor of the Reserve Bank of India for an initial period of three years. Jalan will succeed Chakravarti Rangarajan, who has been appointed Governor of Andhra Pradesh.
Both Jalan and Rangarajan are expected to take charge of their new responsibilities in a weeks time.
The governments decision was announced by finance minister P Chidambaram at a hurriedly convened news conference.
The Prime Minister has approved the appointment of Dr Jalan as the governor of the Reserve Bank of India, Chidambaram said at the packed conference, held in North Block.
The appointment of Jalan as RBI governor would signal a continuity of economic policies, he said. He (Jalan) has worked hard on the approach of the new five-year plan. He is a distinguished economist, an author and is internationally respected.
The announcement, however, has taken the RBI brass and senior government officials by surprise. Rangarajans appointment as Andhra Pradesh Governor (he will succeed Krishan Kant who was recently elected Vice-President) comes barely six weeks before he was due to complete his five-year long tenure in the central bank, during which he oversaw the most significant transformation of the countrys financial sector.
Rangarajans appointment as Governor of Andhra Pradesh is also being seen in political circles as the emergence of another economist-administrator capable of taking on ministerial responsibilities in the government in future.
Reacting to the appointment, Planning Commission deputy chairman Madhu Dandavate told Business Standard, Traditionally, it is defeated politicians who are given the governors job. So the government has done well by appointing him (Rangarajan) as the Andhra governor.
While Rangarajan told Business Standard in Mumbai that his successor should focus on tackling the industrial slowdown, Jalan at his New Delhi office was restrained in his response to the government announcement. I am very pleased to go there (RBI) but have no comment to make right now, he said.
Reacting to Jalans appointment, Dandavate said, He deserves it and I am confident that he will do a good job. The deputy chairman, however, declined to state who would be appointed Jalans successor and said it would be decided by the government.
Jalan has had a distinguished career in the government. Known to be a cautious reformer, Jalan has occupied key posts in virtually all important economic ministries, including those of the chief economic advisor (when he supervised the SICA bill that gave birth to the BIFR), banking secretary, and finance secretary (during the tenure of the National Front government). He has been closely associated with the introduction of the long-term fiscal policy.
Subsequently, Jalan served as chairman of the Economic Advisory Council, executive director on the board of World Bank and member-secretary of the Planning Commission.
Jalan is considered to be close to former Prime Minister V P Singh. In the intense battle that preceded Jalans appointment, it is this factor which tilted the balance in his favour, political sources in the capital said. Others who are said to have supported Jalans candidature include Congress party president Sitaram Kesri and West Bengals Marxist Chief Minister Jyoti Basu. Those who lost the race for the RBI governorship were finance secretary Montek Singh Ahluwalia (favoured by Chidambaram) and Planning Commission member Arjun Sengupta.
Jalans appointment is being termed as a perfect example of the present-day political balance, where the choice of the minister concerned does not matter as much as the crucial consensus that keeps the power balance in a government of 14 parties.
Sengupta was being backed by Pranab Mukherjee, a powerful leader of the Congress Party a force the government could hardly ignore without arousing its anger.
For Prime Minister Inder Kumar Gujral, ruffling a feather within his ministry by not accepting Chidambarams choice was politically a better choice than an unsatisfied Kesri, particularly in the present environment of political uncertainty.
As for Rangarajan, it is solely the clout of Andhra Pradesh Chief Minister Chandrababu Naidu over the UF government that has worked. Naidu is the convenor of the Fronts steering committee and played an instrumental role in installing Gujral as Prime Minister.
Naidu pushed for Rangarajan with Gujral and home minister Indrajit Gupta on the ground that he would rather have an economist as the states governor than a politician. Andhra Pradesh has embarked upon a major investment and industrialisation thrust and Naidu wanted to utilise the services of Rangarajan in his state.
Rangarajan moved 6 weeks before end of extended term
