Candid statement given by the Central Banker,


  • The followings are the highlights of  Reserve Bank of India Governor Dr. Raghuram Govind Rajan's  recent  interview to a channel



  • Central bankers have shown that they can be pragmatic, have to be pragmatic

  • We are dealing with scenarios that India hasn't seen before, economy is much more integrated today

  • You have to figure out what's right and do it, without relying on long traditions or without appealing to ideology

  • That's why labels are not very useful

  • There is time when you want to establish credentials for perhaps fighting inflation

  • But over time other factors come in. For example situation of global economy

  • Don't think I have silenced critics with 50 basis point cut, I don't think that was the aim

  • We were looking at the state of the economy and see what we can do best at particular moment, keeping in mind long-term objective of keeping inflation under control

  • We did what we thought was responsive to the state of the economy

  • Chorus of critics doesn't change, our actions did change

  • This shows things were changing, data was more consistent with what we wanted

  • I think yes we had underestimated China's impact on global economy

  • This is the third bit of difficulty on global level: first the sub-prime crisis, then the European crisis and an emerging market difficulty of which China is a big part but don't forget Russia and Brazil

  • What people don't realise is world economy is closely related

  • We are really connected to China indirectly. Markets we export to are also the markets they export to so we compete in those markets, people we export to are people who export to China, they get hurt and they import less from us. So we are really connected

  • China's pain is India's gain: I think it is taking it a bit too far, I think no country does better because some other country does badly

  • We will be hurt if China does really badly, we would want China to recover

  • But there are offsetting benefits to the costs that are imposed by such a slowdown

  • One of the benefits is we import substantial amount of commodities which China was importing, if China imports less of those, our producers have lower input cost

  • We have seen that in the last few months, margins of our producers have increased

  • It is not an unmitigated blessing but there is also a silver lining

  • It is an opportunity to take advantage of these lower costs, to become much more efficient

  • In times of difficulties, corporations need to figure out how to lower costs, we need to do more of that

  • What China is trying to do seems to be the right thing, to move away from investments in exports towards a consumption led economy, this is what China has been doing

  • This is a reflection itself of the fact that their model is changing in the right direction

  • China suffering consequences of its credit boom

  • China has proved responsible after that initial devaluation

  • Had devaluation persisted, there would have been greater fears of full-fledged currency wars

  • Devaluation started in industrial countries, not China. We tend to overly focus on China

  • We must sympathise with China's move to shift to a more consumption led economy, it is a huge task

  • US not moving Fed rates does create uncertainty, but also creates more accommodative conditions

  • We took advantage of the time we got between taper tantrums and this eventual move

  • Won't say we are out of the woods, but we are closer to the edges of the woods

  • For countries that are in difficulty, Fed rate could exacerbate the difficulties

  • When we went in, we didn't think about the cost of coming out which is quite high

  • India better prepared for Fed rate hike

  • Payment banks can be a game changer

  • Two tough monsoons and moderation in food prices is very creditable for the government

  • Food management by government has been extremely good

  • Government needs to make us even more independent to vagaries of the weather

  • We need to clean up the legacy of bad loans

  • The challenges that the government and the RBI have is substantial

  • Industry should not wait for government actions

  • PM had important message for industry - business is not risk free

  • Industry has to take a plunge with a hope and a prayer

  • Things are moving in right direction. Those who move in early will reap the rewards

  • Industry has burnt their fingers in the crisis and took a long to untangle

  • FDI has increased substantially - foreign investors seeing something domestic industry not seeing yet

  • Industry needs to do additional risk taking - will serve them well

  • The world view of India changing positively

  • PM Modi an articulate spokesperson for India

  • Need to back up PM Modi's visits with action on the ground which reinforces the good impression he is creating

  • Experience of foreign investors should not be worse than they had expected

  • Need to steadily improve reality on ground, business environment

  • RBI looking at reducing all the forms we have - so we don't ask for same data again

  • Marketing is important, we need to rise to the challenge

  • Banks in a tough situation

  • Banks need to have profitability

  • Rates need to be consistent with what's happening in the market

  • A fair amount of transmission can take place

  • With leads banks like SBI showing the way, others will have to follow

  • Finance Minister and I don't always agree, it's meant to be that way

  • If we always agree, public should be worried

  • Economy improving, recovery is getting better

  • Growth of 7% is misleading if you look at old series

  • Message for Janet Yellen - I can just sympathise with her. It is a tough job with everyone looking at you - if you make a mistake this way or that way you effect global development

  • Message for Chinese counterpart - hang in there - I think China's central bank is doing a steady job. It is a voice of sanity

  • Message for India Inc - invest

  • Message for banks - clean up balance sheets, build up human capital. I admire the work bankers doing

  • Message for e-commerce entrepreneur - I just watch in admiration. Potential is huge - you worry about bubbles when small families putting money - so far deep pocket investors - not worried right now. There is opportunity here

  • Message for government - keep doing what you are doing.




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