Rajan lost Raj! Speaks for the hegemony,dupes India!Its people!
Great Walls falls apart as Free Market crashes and the Crash to continue for the survival of breaking Dollar Hegemony!
I pity that your arguments stand no where!
If the global trends have to determine the destination of growth,why should we bet on the global trends depending on virus inflicted apps only?
Palash Biswas
I damn care for the official version of the open secret!
I damn care about those false arguments of a corporate lawyer, who pleaded to deny compensation to Bhopal Gas Tragedy Victims and all set to make India a full fledged Gas Tragedy!
Rajan is not a politician,I believed.
I believed that the CEO of Indian financial governance should not be a bloody politicians and politics might change with changing mandate time to time as it always had been.
The Nation must survive with its economy intact.
Baba Saheb Bhimrao Ambedkar might be thinking the same way,I believe.
Economy should not be a KHULLA KHEL Farrukhabadi as it is reduced to.
Economy is not all about a Kissa Laila Majnu of some Ultimate Ginnie,or some Titanic, or some Arabian Nights like thing.
It`s not a bloody condom,Mr Rajan you know!
It`s not all about honeymoon.
it`s all about the production system where form emerge all the lifelines,which springs all survival kits!
Economy is not all about tax holiday or rate cuts or bail outs or disinvestment or privatization ,or deregulisation, or decontrol or those bloody economic reforms,making laws and breaking laws.
It`s something like resource management!
It is something like revenue management!
Overall it is something like Human resource management to save humanity and nature!
Rajan,you lost Raj as RBI is killed in daylight!
Banking sector exists no more in digital India!
It is all about exclusion all on the name of development,the trickling growth!
It is all about genocide unilateral,racial apartheid and ethnic cleansing which for you do work.
I pity that your arguments stand no where!
If the global trends have to determine the destination of growth,why should we bet on the global trends depending on virus inflicted apps only?
On single day,investors lost no less than seventy five Million in index turmoil and you say, not to be worried!
OK.We are not worried.
OK.We should not be worried!
We bear no tag like you nor we have to become the economist.
We,the Indian citizens are ordinary men and women who perhaps might not add,might not deduct,might not multiply or divide,who perhaps might not formulate or decode the global datas.
But you can!
Thus you stand alone!
And you! Too!
You too reduced to a Dow Chemicals` lawyer!
May you tell exactly when the markets would crash and when it would not crash?
Please tell as we must know as the business friendly governance invests everything the nation and its people have,into this bloddy volatile market.
China opened the great walls!
Now Chinese great walls fall apart!
Mr.Rajan!We have no walls to defend ourselves and we have killed the Himalayas!
You do replicate Chinese ways as you do the same as the Chinese do!
Surprised by global impact of yuan move, China looks to calm markets
China has been so surprised by the global reaction to its currency devaluation that it is likely to keep the yuan on a tight leash in the near-term to head off a currency war that could spark a broader financial crisis, policy insiders say.
Long way to go for India to replace China as a growth engine: Raghuram Rajan
RBI Governor Raghuram Rajan has said it will be "a long time" before India can replace China as a growth engine for the global economy, even if it grows at a faster rate.
The comments assume significance in the wake of a China-led slowdown hurting the markets worldwide in the recent days, which has led to calls in India for taking this crisis situation as an "opportunity" as the global economy may need alternative growth engines.
Asked whether India can replace China as a new growth engine, Rajan said in an interview to BBC, "India is one-fourth to one-fifth of China's size. Even if we can overtake China in terms of growth rates, the magnitude of the effect will be far smaller for a long time to come."
As per the latest data available with the World Bank, GDP of the US is over USD 17 trillion. This compares with China at over USD 10 trillion and India USD 2 trillion.
After Monday's market crash, Prime Minister Narendra Modi had stressed on the need to further strengthen the Indian economy and said that the present global crisis should be converted into an opportunity for India.
Yesterday, Finance Minister Arun Jaitley also asserted that the global market turmoil was not a cause of "worry" and rather presents an opportunity for India to grow further by speeding up the reforms.
Stating that the world was being shouldered by a powerful engine that did not seem to be running fast enough, Jaitley said the global economy now "requires alternative engines".
Stating that China was responsible for almost half of the global growth in the last few years, the Finance Minister said India is now the only major economy to grow at 7-8 per cent and "everybody else is far below".
Rajan, on his part, said that China was a big country that has "become very important to the global economy", and every adverse development anywhere in the world would certainly impact the rest as well.
He, however, said that it was wrong to attribute the problems for global markets entirely to China, as there were a number of other concerns too.
Rajan, who is credited to have seen the global financial crisis of 2007-08 coming, allayed fears of any major crisis being round the corner.
"Based on what I have seen so far there is no strong reason to believe that we are on the verge of another crisis... But we have to be vigilant about kinds of those fragilities that have built up in the last few years," Rajan said.
Rajan also warned against central bankers being overburdened to fix the struggling economies globally and said the consequences may be "more bad than good" if they actually act. He, however, added that situation was different in India where he was still faced with problems like high inflation.
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Aug 27 2015 : The Economic Times (Mumbai)
ET EXCLUSIVE Q&A - `Narrative Now: India Picking Up'
RAGHURAM RAJAN RBI GOVERNOR |
Unlike in 2013, few international investors are talking about exiting India despite an emerging market turmoil. Reserve Bank of India Governor Raghuram Rajan tells ET's MC GovardhanaRangan and R Sriram why it is different this time, and how India is no more in the club of the `Fragile Five' or `Troubled 10.' Edited excerpts:
It is just two years since you took over. Is it back to a similar, frenetic atmosphere?
No, it is not. I mean, this time you have the difference that you have the confidence that we are actually quite healthy. Last time, you did not have that confidence. You know that this will pass and, at some point, markets will wake up and start differentiating.
Just this week, you spoke about how central banks were wrong about `boosterism' and here you have the Chinese central bank's actions.
The point I was trying to make is that our best ability is to improve the environment for a strong sustainable growth and, for a central bank, that is best done by keeping inflation at a reasonably low rate. How low? That is for the government to decide. The government has told us what that rate, that band should be. Beyond that, you can do short-term changes in sentiment. But unless it is accompanied by a change in fundamentals, markets will go up for a few days, then say,`look, nothing really is happening and perhaps these guys are playing to the gallery and that kind of boost does not last very long'. So, my point in making that statement was that we are not anti-growth, we are not anti-economic wellbeing, we are not anti-optimism. But the way we should create optimism is by creating a change in the fundamentals, otherwise we would have no credibility... that is not to say, in an environment of serious market panic, in an environment of serious liquidity tightness, the central bank can't take actions. We certainly would and we have, for example in 2008, by releasing liquidity in the market because mutual funds were under stress. And if the economy is going into a deep dive, obviously interest rates are an option you would use. But you have to be careful about distinguishing emergency circumstances of the kind that perhaps the Chinese central bank is reacting to, from normal circumstances, which we, I think, broadly are in.
You do not see such issues facing India right now?
Well, tell me which other economy is at 7.5% growth?
Obviously, we want growth to be faster than what it is today. Obviously, there are pockets that are hurting. But I think you would be hard pressed to argue that this is the kind of emergency we saw in 2008 ourselves or the kind of emergency that some other countries are facing today. And you have to be a little careful about disrupting the narrative at a time when the narrative is India is picking up, India has a lot of opportunity, India has a lot of optimism. To react as if it is in a deep emergency, the two do not go together.
In 2008, the financial markets seized up. What is the probability of developments in China leading to a similar situation now? If so, do policy makers have the tools to save the world?
We have to be vigilant... I think the lesson of 2008 is markets are so interconnected that what was once thought of as a $100-billion mortgage problem in the United States, $100 billion of losses that had to be allocated, turned into a huge global problem because of uncertainties about which balance sheets were infected and by how much. And also, it became the starting point for other fragilities that had built up. So events like these, and I do not mean just the Chinese event, but events that are earth shattering, so to speak, stem not because the event itself need be that big but it exposes other fragilities that have built up over time. I think we have to see the Chinese as well as the fears about the US monetary policy.There have been significant flows across borders, markets have sort of moved up quite a bit across the world. And so there is concern about whether it has been too easy for too long and whether fragilities exist that people are not looking at, whether everything is priced for perfection as they say.
Has the yuan devaluation sparked a currency war?
Well, some have more control over their currencies than others. Now, there is more talk about the problems associated with unilateral depreciation. I think that as we see the problems associated with this, there will be more of a dialogue which focuses on appropriate rules of the game. It is going to take time and if you look at anything in international fora, it takes a long time, but at the very least, countries are sensitised to the issues and now they have to start debating what to do about it. It is not an easy problem to fix, but, certainly, we got to take the first step which is to ask: Is this a problem we need to discuss and figure out?
What are the implications of the Yuan-induced turmoil on the rupee?
One of the difficulties in the modern world with substantial capital flows is there is some penalty to being seen as attractive, which is you attract substantial capital flows and that tends to cause some currency appreciation, which tends to make production domestically somewhat less competitive. There are some benefits also: capital flows certainly fuels investment and that is a good thing. But figuring out how to manage this is really the central difficulty that emerging markets have. I mean one simple answer is focus on macro stability, focus on creating good institutions. All that is very well, but that attracts even more capital flows. And so, we certainly need to do that and we have been doing that. The government and the RBI have been working on those kinds of institutions. Ultimately, in the long run, we need to immunise our system from being overly responsive to fluctuations in exchange rate, that is, people should by and large be reasonably hedged or they should borrow more in domestic currency than in foreign currency. Those kinds of features would make us more immune. Unnatural movements in other currencies do impinge on us and we would not want to take the route of making ourselves a less attractive destination for investments, which would be one quick and sure way of depreciating our own exchange rate. I would rather say that let us focus on making our economy more flexible so that we can absorb some of these changes and let us be a voice globally saying not to push too hard on the exchange rate channel, use the other channels for energising growth, and that is certainly something that we have been trying to do in the last few months.
One of the worries of this yuan devaluation is its impact on metal companies?
It is a concern. As the finance minister said, we have to find long-term solution for this, one that does not unduly raise the cost of inputs to other entities in the economy so as to make them unviable. Of course, steel is an input for the auto sector and the auto sector is also involved in exports. If you unduly increase the cost of the auto sector, then can we get the same level of exports from there? So it has to be a very measured response. It has to be a response in which the companies themselves do a fair amount on their own and, of course, many of our companies are trying very hard, but the actions by others have to be a second line of defence rather than the first. But it is something that we need to look at carefully.
Is the world getting into the kind of stagnation Larry Summers talks about?
Well, economists always offer views based on a model that is in their mind. The model that he is clearly enunciating is that there is long-term stagnation, a secular stagnation model because of low productivity, and other factors. And, in this kind of environment, the natural rate is very low and so, inflation is not an issue. If, however, you have a different model, either you think financial fragilities that have built up are greater as some Fed decision makers seem to believe, greater than he is allowing for, or that we are not in secular stagnation, that it is just that we have been slow for a long period of time but things are picking up, labour markets are tight.And the last thing you want is the Fed to be surprised by an inflation spike, which may then lead markets to believe the Fed would move faster, more quickly, and that itself could be problematic if there is a sense that the reaction function would be very quick. That could disrupt markets much more and disrupt growth. So I think the Fed is basically evaluating these options.Should we wait and risk a spike or a very strong jobs report, which moves markets quite a bit suddenly and makes us seem behind the curve, or should we move maybe a little ahead of time but have the luxury of raising interest rates slowly over time? Those are the tradeoffs they are thinking about.
Are the central banks the only game in town now?
I will say this: the central banks can actually support growth beyond a point. When there is no inflation, they can cut interest rates and that is the way they support growth, but if you cut interest rate to the bone, there is nothing more to cut. It is very hard to support growth beyond that. The other instruments have to kick in.
You have emphasised a focus on inflation and insisted on government action on the supply side, which other central banks missed.
No, no, I do not think so. I think we are just in a different phase of our growth cycle that is unlike many other countries. Of course, when we started, we were perhaps the single-largest country with that high level of inflation. Now our inflation has come down but other countries' has picked up -Brazil, for example, Russia, Indonesia. So our inflation has come down below those levels.
The Indian political economy is against inflation because the poorest of the poor would get hurt and they take it out on the politician and the politician hates inflation. Yes, the politician hates inflation but when it comes to bringing inflation down, we also need to ensure there is political support for this process because there are costs, it is not costless.And the point I was trying to make earlier this week is that there is no better time to bring it down than when you have got everything in the world working towards lower inflation. And if you can bring it down and make it stay down and in people's expectations, it gets set at this level, you will have won a victory for a long time. And I would like to point out that Dr Rangarajan's fight against inflation was what set the stage for Bimal Jalan to be expansionary, to support NDA 1's period of strong growth. And we must not forget that poor Dr Rangarajan got brickbats in his time for killing inflation. And he kept trying to tell people that that is what I did, but people thought that it was just the cost without the benefits.
Have you won the war on inflation?
The first phase is to bring it down, then to set the expectations, you need the institutions. So part of my `speechifying' to some extent is to build that political support because there are always some interests who are more vocal than others. And the silent majority that suffers from negative real interest rates for a sustained period of time does not get to express its preferences. In fact, as I said in the speech, it expresses its preferences by walking with its feet, taking deposits out, investing in gold, investing in real estate and not investing in financial assets. For a country that needs tremendous growth, we need financial savings to move into places like infrastructure, risk capital for corporate ventures and so on. And for that, we have to convince our savers, who are our average households, that his money is safe, safe not from the thief but from the greater theft which is inflation.
Are you worried about the NPAs of Indian banks?
It is a source of concern. When you say worry, I am not worried about the financial crisis. I am more worried about the size of the losses that eventually will have to be absorbed either in terms of additional capitalisation, etc, over time. And we want to minimise those losses and I am also worried about whether as growth picks up, they have the capacity to fund that new growth, which again is an issue of how much capital will they require to fund growth.So the worries are more about the hit to the taxpayer as well as about funding the necessary growth.
The 525 scheme to ease banks' burden is seen by some as kicking the can down the road.
No. We have fairly careful inspections of the banks themselves to see what is going on. But even in things like 525, there are some safeguards to ensure it does not become a free-for-all. Among the safeguards, the first you cannot reduce the NPV (net present value). So you can push it out, but you cannot reduce the NPV, which is a way of ensuring too much of it does not get pushed out into the future. Second, we have been very much against long moratoria in repayment. In some cases, where there were long moratoria, we examined closely and some of that was because they have to repay ECBs (external commercial borrowings) of the immediate period and that is why in the Indian loans, there was a moratoria but debt repayment was taking place.We want the project to be functioning. So a variety of these checks and balances, plus our inspectors are going in to look at a random basis at some of these to see what is going on. We tell banks the idea is not to push repayment so far into the future that you face a repayment crisis down the line. It is to set the repayments consistent with profile of the flows that will happen from the bank. Now, is it all perfect?
The truth is we need a lot more evaluation. We have asked big deals to be evaluated by independent committees but we need more such capacity which is independent to be able to look at these things and pronounce on them. Otherwise, we would not have the ability to do new lending down the line. A lot of the capacity is in a few banks, very few banks, and the same guys we see again and again. We need much more. We need each of the banks in a consortium to have the independent ability to evaluate a project and take a view. Some of our mistakes were made by herding, the smaller banks following larger banks into a problem. So these are things we need to take much more care about.
Some commentators say the government's measures are not enough to reform state-run banks.
Everything has to start somewhere. The government has correctly started at the top. Put good management at the top. Work on revitalising the system for existing people. It can't all be determined at one go from the department of financial services. What I find healthy about it is the willingness to let the banks determine their own course. That absolutely has to be the way. If it is all determined from a centralised system, they all look the same. That was one of the complaints at the Gyan Sangam. If you enter a public sector bank branch, you don't know which bank it is, unless you see the logo. To differentiate, banks have to have different strategies and different boards and empowered managers.
You put out a long list of things to do as a shortterm time table on the day of taking charge. How do you assess your achievements?
It is for the others to assess. Starting from inflation, and inflation framework, going to new banks -we said we will give bank licences on time, we did. On the resolution side, I did not speak that much. We have done as much as we could without a functioning bankruptcy code. Working without a bankruptcy code is extremely difficult in resolving. Because the creditors don't have as much power to develop possibilities. We made some advances with JLF (joint lenders' forum). The large group data base. Banks did not know who was lending to whom. Now they know. They can see overall system exposure to groups, individuals. On financial inclusion, the government has made changes. On the markets side, we moved some, for example, the interest rate futures.Our liberalisation was constrained by the overhang of the Fed monetary tightening. And I would say that we are getting to the point where regardless of whether they do it or not, we will move forward.
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