At 50, Rajan will be among the youngest to occupy the high office at Mint Street in Mumbai, where he takes over from incumbent Duvvuri Subbarao.
Rajan, who joined the Finance Ministry in August 2012, brings with him wide experience as a banker, academician and technocrat, having served institutions such as the International Monetary Fund and taught at the University of Chicago.
At 50, Rajan will be the youngest to occupy the high office at Mint street.
An alumnus of the Indian Institute of Technology (IIT) in New Delhi, the Indian Institute of Management (IIM) at Ahmedabad and the Massachusetts Institute of Technology, and a gold-medallist all through, Mr. Rajan was the youngest economic-counsellor and chief economist at the IMF from October 2003 to December 2006.
His appointment comes at a time when the Indian economy is passing through rough weather and the government and the central bank are not particularly seen to be in sync on ways to handle the situation.
"We have enough ideas. It is not just the currency, it is financial inclusion, it is growth. I think there is a lot to do," Rajan told reporters on Monday, his last day at the Finance Ministry as economic advisor.
However, Rajan emphasised that there is "no magic wand" to solve the current economic problems.
"These things are not going to be overcome overnight. There is no magic wand. But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it," he said.