NEW DELHI (Reuters) - The government named Finance Secretary Duvvuri Subbarao as Reserve Bank of India (RBI) chief to succeed Yaga Venugopal Reddy who steps down this week, and analysts said he would continue Reddy's battle to bring inflation down from 12 percent.
Subbarao, who has never worked at the Reserve Bank of India, takes over as inflation in Asia's third-largest economy is running at its highest rate since the mid-1990s and growth has slowed below 8 percent from a breakneck pace second only to China among major economies.
Subbarao and deputy central bank governor Rakesh Mohan were the front-runners to succeed Reddy if his term was not extended, as some thought it might be, and traders said markets, which were shut when the announcement was made, were unlikely to react much.
"The most important thing for the market will be the continuity of monetary policy. The bias which Reserve Bank of India had in the last few months has been hawkish," said Sonal Varma, economist at Lehman Brothers.
"From the statements made by him in the recent past, I think moderating inflation will be his priority."
A career civil servant, 59-year-old Subbarao has been Finance Secretary since 2007.
Subbarao, who takes over when Reddy leaves on Sept. 5, has been appointed for three years, shorter than Reddy's five-year term which has been marked by unprecedented foreign investment inflows, a huge spurt in economic growth and a global oil shock.
The RBI wants inflation down at 7 percent by the end of the 2008/09 fiscal year in March. It stepped up monetary tightening aggressively in June and July as inflation, driven by high fuel and commodity prices, headed for double digits.