As a result, he has prepared the stage for the new incumbent to play a symphony.
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“At the core of the monetary policy, is the desire to see a sustainable growth rate along with empowering the banks to lend more at competitive rates”, Assocham Secretary General D.S. Rawat said. “My sense is the chosen path will be one of credibility and continuity”.
Indian central bank calls on govt to set up monetary panel; holds rate was posted in Business of TheNews International – https://www.thenews.com.pk on August 10, 2016 and was last updated on August 10, 2016.
When Rajan took office in September 2013, he moved quickly to bolster the rupee as the U.S. Federal Reserve’s move to end its stimulus roiled global financial markets.
With a month to go, progress is evident on all fronts.
“Some of those speeches have been on economic issues but outside the monetary policy”. Despite the RBI cutting the repo rate by 150 basis points since January 2015 and providing easy liquidity, Rajan observed that banks have passed on only a slice of the previous rate cuts to borrowers.
The government is yet to announce Rajan’s successor with current RBI deputy governor Urjit Patel reportedly on the shortlist, along with economist Subir Gokarn, who served as RBI deputy from 2009 to 2012.
RBI Governor Raghuram Rajan on Tuesday strongly defended the monetary policy panel and allayed fears that the central bank will become weaker under the new arrangement, saying the new system will instead make the rate-setting process more independent and credible.
Rajan, who kept the key policy rates unchanged in his last monetary policy review, also announced the start of a year-long public awareness and consumer protection campaign. “I impact the lives of the people of this country with the decision that I take on interest rates and inflation. People can have different judgments, let us see in 5 to 6 years’ time, how it pans out and then we see whether the judgment was good or bad”, said Rajan. “It is appropriate for the Reserve Bank to keep the policy repo rate unchanged at this juncture, while awaiting space for policy action”. Rajan said there were risks to the March 2017 target of 5 percent for headline inflation, which climbed to a 22-month high of 5.8 percent in June, but added that it has retained its GDP growth projection at 7.6 percent for 2016-17. There are indications that prices of vegetables are edging down on the back of favourable monsoon rains, according to the central bank.
One of the highlights of Rajan’s tenure has been the doggedness with which he has pursued banks to get them to clean up their books.
The RBI governor said while timely implementation of the goods and services tax will be challenging, there is no doubt that it should raise returns to investment across much of the economy even whilst strengthening the government’s finances over the medium term.
The political calendar also poses a risk. Did I come in with three years (in mind)?
Ruling out conflict of interest between the government nominees and RBI members in MPC, Rajan said: “The premise that there will be conflicts between the selection commission appointed MPC members and RBI-appointed members is probably unwarranted. So the culture of cleaning seems to be well embedded as well as the culture of recovery of some of the loans”.
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