- The Reserve Bank is likely to hold repo rate at 6.5 per cent on Tuesday
- In focus is Raghuram Rajan's future as his tenure ends in September
- Dr Rajan is likely to be quizzed whether he would prefer to go back to US
Reserve Bank of India's policy review meetings are widely tracked for insights into interest rates, inflation and economy, but on Tuesday, Governor Raghuram Rajan's future at the central bank is likely to dominate sentiments.
Since 1992, every RBI governor has got a two-year extension on completion of his tenure, but it is not clear whether Dr Rajan will get one too. The Modi government has said it will decide only closer to the end of his tenure in September, amid demands from BJP lawmaker Subramanian Swamy for Dr Rajan's removal and a counter-campaign for a second term for the RBI governor.
Interestingly, Press Trust of India quoting sources reported that Dr Rajan is not heading the panel to select the Reserve Bank's new deputy governor, in a break from the past. It was cabinet secretary who headed the panel, which further added to speculation about the RBI chief's future.
Dr Rajan, who will speak at a press conference post the RBI's rate announcement at 11 a.m. on Tuesday, is likely to be quizzed about a media report that said he would prefer to go back to the United States after his three-year term expires in September.
"I think Governor Rajan will be grilled on whether his second tenure will continue," said market expert Hemendra Hazari . "He has very ardent supporters in business media and foreign capital... Articles are threatening doomsday if his tenure is not renewed."
He may also be asked about the multiple attacks on him by Mr Swamy, who wants him sacked for not cutting interest rates soon enough and has said that the RBI governor is "mentally not fully Indian" since he continues to renew the Green Card issued to him by the US government.
The personal attack on the RBI governor has not gone down well with investors, economists as well as India Inc., which has in the past criticized Dr Rajan for not doing enough for the industry. At least seven online petitions doing the rounds in support of a second term for Dr Rajan and have together garnered nearly 60,000 signatures so far.
"There should be a debate on his policies and not on his personality... Much as I would disagree with many of his policies, this is not the way you treat the governor of your central bank," Mr Hazari told NDTV Profit.
Appointed by the previous regime, Dr Rajan's position was seen as precarious when the BJP came to power in 2014. But the governor has emphasized that there is a "respectful relationship" between the central bank and the government.
Last year, PM Modi had publicly praised the RBI Governor for "perfectly" explaining complex economic issues to him in regular one-on-one meetings.
Meanwhile, economists expect the RBI to keep its benchmark repo interest rate unchanged at a five-year low of 6.50 per cent, given concerns about rising inflation.
"You can never say never with a central bank but the vast probability tomorrow is for a pause," said Saugata Bhattacharya of Axis Bank.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
