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Raghuram Rajan defends govt, says relationship with FM & officials “cordial”

11 August, 2016

On Tuesday, outgoing Reserve Bank of India (RBI) governor Raghuram Rajan left interest rates unchanged, in a bid to continue the firefight against retail inflation which remains perilously close to the upper limit target of 6%. 

Moreover, the RBI is not too upbeat on growth prospects in the global economy across both advanced and emerging countries. Political developments like Brexit are likely to have a long term impact. The central bank, however, said that a good monsoon, the passage of the Goods and Services Tax (GST) and the seventh pay commission award will augur well for the Indian economy .

Rajan is on his way out and this was his last monetary policy review, before he leaves office in September. The MIT trained economist has, however, indicated that his last few weeks in office will be action packed.

Rajan is speaking now to two business news channels- CNBC TV18 and ET Now. Let’s follow what he has to say:

2:45 pm – Says he wears his favorite maroon tie on special occasions.

2:44 pm – Says “trappings of governorship” are not what excite him. “People saluting you or badgering you for selfies” is not what excites me, Rajan says. 

“You have to be on your guard all the time. You are always in the limelight, that’s the problem,” he says.

2:43 pm – Says he has tried to justify the economic link in his speeches. Says he has made various private suggestions to the government on course correction, but never in public.

Says public and private service are related, but does not answer directly on whether he will come back to work in India. “I am getting back to research at Chicago,” he says.

2:40 pm – Says most people who make allegations on his speeches, haven’t read them. “I do not believe it is my job to criticise the government. What I have said on various occasions is ‘here is the way to go,’ ” he says.

Says, an atmosphere of tolerance is important for the country’s economic growth. 

2:39 pm – “What we have done could not have been done without strong cooperation with the government,” he says, but declines to talk about private conversations. “ I have never received a directive to favour a party or give a license to such and such,” he says.

2:38 pm – Says his relationship with the finance minister and government officials has been “absolutely cordial,” though admits “there has been friction” on occasions.

2:35 pm – On the attacks from Subramanian Swamy, Rajan says there “was an enormous amount of support from the public”. “I don’t feel isolated.”

Declines to comment on whether the government supported him enough. “Criticism comes with a territory. Unsubstantiated allegations vitiate the atmosphere in the country,” he says.

2:31 pm – Cyber security risks do exist because there is a certain laxity in cyber culture pretty much everywhere.

2:30 pm – Two years from now the banking system will be mixed in terms of ownership, size and the markets it services. Banks and NBFCs will be competing with each other in a more diversified and therefore, a more resilient system.

2:28 pm – I think the rupee is currently fairly valued. We are able to export significant amounts.  The Indian banking system may not be ready to engineer a fall in the rupee as China did to its currency. “What would you want us to do differently from what you are already doing?”

2:23 pm – Defends his decision to not use the country’s foreign currency reserves for cheaper lending. Says the government has the first claim on profits from such reserves. Says no money has been held back from the government.

2:21 pm I do think that exit from current policy is difficult. At some point there would be adjustment. 

2:12 pm – Rajan explains his stand on inflation, says he has, “never been an inflation nutter.” The issue is not straightjacketed, he says, adding that financial stability becomes more of an issue when the economy is on a downside. “We have taken into account a state of the art discussion on inflation,” he says. 

2:09 pm – The RBI is supposed to be an entity that is conservative. I have been open to stern up the reform process. Wherever we have to say no, I said no in the best interest of the country.

2:07 pm – Rajan says that but for the government’s help the monetary policy committee would not have been possible. Says the committee would reduce the pressure on the governor in times to come. Also, it would allow for continuity of policy.

2:05 pm – Some of the attack are ado hominenm. I didn’t pay any attention to it, he said while responding to question over attacks and criticism

2:03 pm – Rajan starts off by telling ET Now that despite a good monsoon risks remain and that the RBI will have to watch out for negative signs on inflation. He says impact of pay commission and GST needs to be watched.

2:02 pm – The immediate objective was to stabilize the economy. The rupee was the barometer of the economy, he said in response to the question on his immediate goal after taking up the RBI governor’s job.

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Raghuram Rajan defends govt, says relationship with FM & officials “cordial”

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