RBI Governor Raghuram Rajan’s ultimate legacy for India’s economy will be decided years after he leaves office. As he prepares to exit, he’ll turn over control of monetary policy to his successor and a new rate-setting panel. That six-member committee is one of the most significant steps remaining in the biggest overhaul of India’s central bank in its eight-decade history, a process initiated by Rajan when he took charge three years ago. His lasting impact now hinges in part on whether the body will establish its independence and keep India’s inflation rate between 2 percent and 6 percent over the long haul.
While Rajan managed to cement his inflation targeting framework into law, Prime Minister Narendra Modi faces calls from within his own party to stimulate growth ahead of key state elections leading up to the next national vote in 2019. In Rajan’s final review on Tuesday, he held interest rates at a five-year low as consumer price inflation crept close to the upper band of his target.