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Business News/ Politics / Policy/  Monetary Policy review: What RBI’s Raghuram Rajan said
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Monetary Policy review: What RBI’s Raghuram Rajan said

Rajan says the perception that India is a problem doesn't exist any more

RBI governor Raghuram Rajan at the press conference in Mumbai on Tuesday. Photo: PTIPremium
RBI governor Raghuram Rajan at the press conference in Mumbai on Tuesday. Photo: PTI

Mumbai: Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday held the benchmark repo rate steady for the third time in a row, while cutting the portion of deposits that banks must hold in government securities by half a percentage point to put more money in the banking system. Rajan was more sanguine about the economy than at any time in the recent past, saying “India is not a problem any more." Here is what he said:

On inflation:

“If disinflation proceeds as warranted, we will eventually have room to cut rates. I want to emphasise that the RBI in no way will hold rates high any longer than necessary. There is a path we are trying to achieve and we want to achieve that path. We are not against growth. But we do think that the growth will be most benefited if we disinflate the economy and we don’t have to fight this fight again. Let’s fight the anti-inflation fight once and let’s win."

On fiscal deficit:

“On the fiscal deficit, the past government and the current government have stated again and again that we are on the fiscal consolidation path. I don’t think there is any reason to doubt it."

On improving fundamentals:

“I think it’s been a joint effort between the central government and the Reserve Bank to help improve the macro fundamentals of the economy. Amongst other things the fiscal deficit has been kept on a glide path that has been suggested by the government. Secondly, the current account deficit has been brought down significantly since last May from 4.5% of GDP (gross domestic product) to something closer to 1.5-2% today. Third, our reserves have increased substantially since then. We are in a much better reserve position. Fourth, and this I do not want to diminish, I think the expectation that we will confront and deal with inflation is much stronger now than it was earlier."

On India

“I keep saying this in international fora that India is not a problem any more. I think there was a perception of a problem, I don’t think there was a real problem last year. But I think today that perception also doesn’t exist. Perhaps the most important thing is the fact that we have a stable government. Political stability in my mind is worth a tremendous amount as far as the external situation goes and that is a big change."

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Published: 05 Aug 2014, 07:15 PM IST
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