Dengarkan

Indians are hoping their new Central Bank governor can help save them from a deepening economic mess.

Just a few years ago, India was growing at more than 8 per cent a year and seen as Asia's other rising giant.

But times have changed, growth has slowed, the rupee's value has plunged and government efforts to improve the economy are faltering.

And these are huge challenges for incoming Central Bank governor, Raghuram Rajan.

India's economy has been on the slide for several years now, but a degree of panic set in last week when the rupee plunged to a new low.

The currency has lost more than 15 per cent of its value against the US dollar in the past 4 months, prompting India's Finance Minister Palaniappan Chidambaram to address concerns.

“ Thanks to the global slowdown and some domestic factors, the India economy is challenged. In the last 12 months the government has taken a number of measures to contain inflation and to revive investment and growth. Some results are visible yet there are many challenges that have to be overcome.”

Dr Geethanjali Nataraj, an economist with the Observer Research Foundation in Dehli, says Asia's third largest economy faces problems on all fronts.

“The Industrial industry production index has been falling, the current account deficit has been increasing. You know, the rate of unemployment has been high, the GDP growth has been shrinking, and the entire fundamentals of the economy have performed very badly.”

One of the factors driving down the value of the rupee is a blow-out in India's current account deficit, due to crude oil imports ... and India's love affair with imported gold.

Dr Nataraj says the coalition government led by Prime Minister Manmohan Singh hasn't dealt well with the problems.

“The government has been so caught up in its corruption scandals, the economy has been completely neglected.”

India's government has tried to address the economic problems. The Central bank has intervened by buying more government bonds, while new limits were recently imposed on the amounts of money that could be taken out of the country.

But Economist Santinder Bhatia from the Indian Institute of Foreign Trade says those policies haven't really worked.

“Unless your economy is showing fundamental strength, the monetary measures cannot be effective. So just the monetary measures cannot help. And then even the monetary measures like increase in interest rates, increase in duties, they have actually added to the crisis.”

Dr Bhatia thinks the plunging rupee is nearing its low-point.

That'll be good news for Raghuran Rajan. He's the man tasked with sorting out the mess.

The 50-year-old has quite the resume, having been the Chief Economist of the International Monetary Fund, and an adviser to the Indian government.

There are high expectations on him for when he takes over as Central Bank governor early next month, but Geethanjali Nataraj says there's no quick fix.

“Even though he's very willing, he's extremely intelligent and he knows how the economy works, and what needs to be done, he might have to battle a lot of bureaucratic hurdle, he may find it very hard to convince the govt to take up policy reform.”

She says the next real opportunity for a fresh start for India's economy will be after next year's general elections.

“I think everybody is fed up with inflation, the prices have risen so high, there's absolutely no growth, there's joblessness. The crime rates in India are so high, if you look at New Dehli the crime rates have increased phenomenally, there's been an exponential rise in robberies, muggings, rape cases. It's basically because people are frustrated, they need jobs, they don't have money, and I think the overall economic situation is very bad for the common man.”