Former International Monetary Fund chief economist Raghuram Rajan has been appointed the chief economic advisor in the Ministry of Finance. The Appointments Committee of the Cabinet approved his name on Friday, a finance ministry official said. Rajan succeeds Kaushik Basu, who would return to a professorship at Cornell University in the US.

Rajan, the Eric J Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business, would join the finance ministry at a time when the economy is going through a difficult phase, with high inflation and interest rates, slowing growth, declining industrial production, muted tax collections and wide fiscal deficit. 

Industrial production contracted 1.8 per cent in June and 0.1 per cent in the quarter ended June.

A selection committee headed by the Prime Minister’s Economic Advisory Council Chairman, C Rangarajan, had recommneded Rajan after going through 18 applications. Rajan, an honorary economic adviser to Prime Minister Manmohan Singh, had not applied for the position.

On Monday, Finance Minister P Chidambaram had announced a plan to boost the economy. He had said adjustments would be made on revenue and expenditure to rein in the fiscal deficit. Also, in an indication of tough steps ahead, he had asked people to share the burden of fiscal correction. (Business Standard)