Economists say Rajan has good chance of staying as RBI governor – if he wants to

Reserve Bank of India (RBI) governor Raghuram Rajan could be reappointed to the role later this year when his term draws to a close, but he may have other appealing options.

Rajan's first three-year term at the central bank is set to end in September. He was appointed by former Indian prime minister Manmohan Singh, but the decision over his reappointment will fall to Singh's successor, Narendra Modi.

The Modi government and Rajan have not always seen eye to eye – the government would have preferred the RBI governor to adopt a less hawkish stance on inflation, and Rajan has repeatedly pressed the government to exercise fiscal restraint. Rajan appears broadly to have got his way on both counts.

Subroto Roy, a retired professor of economics, says that despite the occasional disagreements, Modi "seems to like Rajan", adding that the government needs his expertise.

Rajan's three years have been successful ones for the Indian economy. He has presided over a decline in inflation from over 10% in 2014 to the current 5.4%. At the same time, growth has been robust and is expected to run at 7.4% in the fiscal year 2015–16. He has launched programmes to strengthen the banking sector and extend financial services to the unbanked, and presided over the introduction of inflation targeting in early 2015.

Rajan is also highly regarded on the international stage. He is credited as one of the few economists to spot the 2008 crisis on the horizon, and was chief economist at the International Monetary Fund (IMF) from 2003 to 2006. He was appointed vice-chairman of the Bank for International Settlements in November 2015, the first governor from an emerging market to hold the position.

Another economist, who asked to remain anonymous, said: "I think that [Rajan] will definitely be appointed, should he want to be reappointed." He noted, however, that the RBI governor might face a difficult choice in September, as he is on leave from his tenured professorship at the University of Chicago Booth. The economist explained that US universities rarely grant leave for more than two or three years. The university did not respond to a request for comment. 

A second potential option for Rajan is a move back to the IMF. Managing director Christine Lagarde's term is due to end in July, though she could be appointed for a second term, and has indicated a willingness to serve another five years.

Rajan has strong international credentials and would be applying for the job at a time when emerging markets' clout at the institution is on the rise. Nevertheless, the economist said it was unlikely the "dominant members" of the IMF would sanction an Indian IMF chief, a point echoed by Roy.

"I am sure Rajan would like [to serve as managing director] but I doubt the international community, namely the US, would want it," he said.