Tuesdy by the Office of the Prime Minister was a surprise, as Subbarao current three-year term was to expire next month. However, observers say, given the global economic instability, the government does not want to wait, and opted for continuity in the change in the central bank.
Finance Minister, Pranab Mukherjee, was effusive in his praise of Subbarao, who said he was doing "a particularly good job." "Although it was time to decide on the extension until September, we decided that we must do quickly to ensure there is no uncertainty," Mukherjee told reporters after the announcement.
Subbarao immediate challenge is to prevent the crisis caused by lowering of Standard & Poor's credit rating of U.S. extends to India. With world prices of raw materials and oil falls, must decide whether to adhere to anti-inflationary stance or a pause in the rate of increase to revive economic growth.
For his re-election, the governor said he was pleased that the government had placed their trust in him at this critical juncture in the global economy. "I look forward to working with a great team at the Reserve Bank to meet the many challenges ahead," he said.
Subbarao was appointed central bank governor in 2008, when his immediate task was to overcome the fallout from the global financial crisis. It was also the first governor in recent times to join the RBI directly from the government, where he was Finance Secretary. He is also credited with good news about the 2008 crisis in a fairly smooth.
Rakesh Mohan, RBI deputy governor of the former and a former colleague Subbarao said that he wanted the extension was for three years. "He was the governor during very difficult years, from September 2008 until now. Is very competent," said Mohan.
Subbarao's predecessor, YV Reddy, said: "I always knew was coming, it is appropriate. Continuity is logical and definitely is on the basis of the results. It is particularly valuable at this time of crisis." The bankers also were happy with the development because they expect a continuation of politics. HDFC Chairman Deepak Parekh said it was waiting for the extension to be given to Subbarao. "It has protected India's financial sector very well, even when the world was falling apart. This extension means that there would be continuity, thereby ensuring consistency. In banking, it is always better to err on the conservative side, "said Parekh.
Subbarao, which was initially criticized for falling behind the curve of her "baby steps" on inflation, became one of the most aggressive central banks in the world, increasing key policy rates 11 times since March 2010 in an effort to cool inflation, now hovering around double digits.
Under his leadership, the central bank raised inflation estimates four times as bottlenecks in supply, wage increases and a shift towards consumption of diets rich in protein continued to fuel inflationary expectations.
In the last three years, the main emphasis of his era to make the central bank of a knowledge-based organization. I wanted to demystify the governor's office and the drive to improve communication, which resulted in more frequent policy reviews and detailed the expected outcomes of policy actions. His colleagues at the central bank said he spent considerable time with bankers, captains of industry and other stakeholders in any policy decisions.