NEW DELHI – The Governor of Reserve Bank of India, Dr.Raghuram Rajan, announced on June 19, 2016 that he would not be resuming his post once his term expires on September 4 this year.

On June 20, the NDA government announced an economic reform, which it describes as a “radical liberalisation of Foreign Direct Investment” in sectors such as defence, civil aviation and pharmaceuticals.

100% FDI has been permitted in defence and trading (including e-commerce) and up to 74% in pharmaceuticals. While Indian-based airlines have been permitted 100% FDI, foreign carriers are restricted to 49% of stake in a venture and rest can be owned by private investors, a citizen based in India or overseas.

In his tweet, Prime Minister Modi wrote: “Today’s FDI reforms will give a boost to employment, job creation and benefit the economy. This is second major (FDI) reform after the last radical changes announced in November 2015”

Many speculate that this is a reaction to the announcement by the RBI Governor. However, the government has declined this allegation.

Dr. Rajan in an email to RBI employees, which was later published on the central bank’s website, wrote: ”On due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016”

Arun Jaitley, the Union Finance Minister said that a decision on his successor would be announced shortly.

Deiptimaan Chowdhury, Correspondent (Business)