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Rajan promises bold reforms, quick action
Highlights
Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will...
Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that
Rajan’s prescription:
* In order to protect households against rising consumer price inflation, the RBI will issue inflation-indexed saving certificates which will be linked to CPI by Nov 2013
* There will also be a Giro-based bill payment system where households can pay utility bills, school fees etc anywhere and at any time
* White-label ATMs will also be increased pan India
* Pre-paid cards will be used for remittances and cash payments along with Aaadhar
* RBI will also explore mobile-based payments where encrypted SMS can be used for fund transfers and mobile payments across telecom service providers and handsets
Acknowledging that the country is passing through difficult times, the new RBI Chief Raghuram Rajan reminds that India is a fundamentally sound economy and felt the recent “gloom and doom” is overdone.
In his first media conference shortly after taking charge at the Mind Street from Duvvuri Subbarao here on Wednesday, a highly spirited Rajan said that the medium-term fundamentals of the economy remains strong.
“We certainly do not need false optimism, but all the doom and gloom is probably overdone,” Rajan said. He said the economy was passing trough challenging times, but it should not be called a crisis.
“These are not easy times, and the economy faces challenges. At the same time, India is a fundamentally sound economy with a bright future,” Rajan said. “Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that,” he added.
50-year-old Rajan, who is the second youngest Governor after CD Deshmukh, moves to Mint Street after a year-long stint as the chief economic advisor in Finance Ministry. Rajan unveiled a bold, new RBI with a slew of reforms, many of them focused on "protecting the value of money" and emphasised that while the Indian economy faced challenges, it was fundamentally strong.
His priorities include: the stability of the rupee and "low and stable levels of inflation", and promised that his policies would lead to "faster, broad based inclusive growth leading to fall in poverty".
In a lighter vein he said: "Some of my actions will not be popular.. am not looking to garner Facebook likes." Rajan stressed on the importance of effective communication, which his predecessor D Subbarao was accused of neglecting, and said, "The RBI should be a beacon of stability... the public should have a clear idea of the central bank...key to all this is communication."
He said, he would focus on “transparency and predictability” in the central bank's functioning. He assured quick action on falling rupee, Rajan said the RBI will allow importers to rebook 25 per cent of cancelled forward contracts. The central bank would also allow the introduction of cash settled 10-year interest rate future contracts, he added.
The RBI, he said, would work together with the government and market regulator SEBI to steadily liberalise markets.
“At a time when financial markets are volatile, and there is some domestic political uncertainty because of impending elections, the Reserve Bank of India should be a beacon of stability as to its objectives,” he said.
“That is not to say we will never surprise markets with actions. A central bank should never say never, but the public should have a clear framework as to where we are going, and understand how our policy actions fit into that framework,” Rajan said.
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