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‘India economy faces challenges’

MUMBAI (AFP) – India s new central bank governor said Wednesday the economy faced challenges but was fundamentally sound, as the country battles a plummeting rupee and decade-low growth.

Raghuram Rajan, a former IMF chief economist, also said achieving “low and stable” inflation was crucial, in his first public comments since taking over as Reserve Bank of India governor earlier on Wednesday.

“The economy does face challenges, at the same time India is fundamentally a sound economy with a bright future,” he said in comments broadcast live on television.

Rajan added that the Reserve Bank of India (RBI) needed to be a “beacon of responsibility” and that protecting the value of money is an “important objective”.

He replaces Duvvuri Subbarao as RBI governor.

Subbarao said earlier Wednesday that his successor was in for a bumpy ride with the rupee having fallen sharply and an economy that grew at a decade low of five percent in the last financial year.

Rajan takes charge as some analysts fear the once-booming economy could be heading for a meltdown, with a record current account deficit and a currency which has lost up to a quarter of its value against the dollar this year.

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