Rupee at huge risk if Rajan’s term not renewed: CLSA

The Dollar Business Bureau

CLSA, the global brokerage firm, said that the rupee will fall under serious pressure if the Reserve Bank of India (RBI) governor’s tenure is not renewed by the government.

The three-year time frame of Raghuram Rajan, as governor of the central bank, will come to an end in September 2016.

Christopher Wood, CLSA analyst, in his ‘Greed and Fear’ report wrote that if Rajan's tenure is not renewed then it will become the biggest risk in the currency market.

Wood also indicated that there would be an impact on some financial markets if the Indian government does not renew the tenure of Rajan. Wood is the only person in the worldwide investor community, who has raised such a concern. 

Rajan took charge as the governor of the India’s central bank in September 2013, when the country was in the middle of a serious currency crisis, with the rupee hitting a low of 68.85 against the dollar.

Within few days of his appointment as RBI governor, the rupee saw stabilisation. By November 2013, the rupee rose to 61-62 per dollar. The strong reviving of rupee forced the domestic market to an all-time high during November.

During Rajan’s tenure, the rupee has outplayed its global peers. Finance Minister Arun Jaitley said that Rajan was able to bring in effective exchange rates, where it was increased by 5.5 percent and 3 percent in 2014-15 and 2015-16, respectively.

Rajan was praised widely for chasing high inflation that kept the interest rates at high levels, contemplating the economic growth.