1. Raghuram Rajan says not in favour of depreciating rupee: Report

Raghuram Rajan says not in favour of depreciating rupee: Report

Reserve Bank of India Governor Raghuram Rajan said he was not in favour of depreciating the Indian rupee and joining a global wave of monetary measures that have weakened currencies, according to a newspaper interview on Wednesday.

By: | Mumbai | Updated: August 26, 2015 10:05 AM
rbi raghuram rajan

Reserve Bank of India Governor Raghuram Rajan said he was not in favour of depreciating the Indian rupee and joining a global wave of monetary measures that have weakened currencies, according to a newspaper interview on Wednesday. (PTI)

Reserve Bank of India Governor Raghuram Rajan said he was not in favour of depreciating the Indian rupee and joining a global wave of monetary measures that have weakened currencies, according to a newspaper interview on Wednesday.

The comments, in an interview with a business daily, reiterate Rajan’s frequent criticisms of the competitive devaluations he has said is occurring globally because of actions taken in the euro-zone, Japan, and most recently China.

Instead Rajan said India needed to work on making its economy more competitive, while noting India is now “quite healthy” and in a better position to handle global turbulence than it was in 2013.

“Unnatural movements in other currencies do certainly impinge on us and we would not want to take the route of making ourselves a less attractive destination for investments which would be one quick and sure way of depreciating our own exchange rate,” Rajan was quoted as saying.

“I would rather say that let us focus on making our economy more flexible so that we can absorb some of these changes.”

The devaluation of the yuan and growing fears over the Chinese economy have caused large falls across emerging markets, including India, pushing the rupee to a two-year low of 66.76 to the dollar on Tuesday.

The moves in the yuan, which were followed by China’s latest cut in interest rates on Tuesday, have sparked some market expectations the RBI may also ease monetary policy to avoid destabilising inflows and to help out exporters.

India has seen hefty flows from foreign investors, who have bought shares worth $5.8 billion and debt worth $8 billion so far in 2015.

“I don’t think we are in panic mode by any stretch of imagination… We are in vigilant mode,” Rajan said.

“I have no doubt that we have enough ammunition, reserves, good policies to withstand that.”

  1. K
    Kanwal Jit
    Aug 26, 2015 at 1:21 pm
    I concur with the Governer RBI. The primary consideration for improving the economy should be on removing the bottlenecks in the system hindering economic growth. Depreciation cannot replace them, It is amongst the last measures that can be used for tinkering with the fringe aspects that hinder an economy. The global issues with compeive Quanative Easing are well known. The effects in increasing inequality due to increased liquidity in the system are the subject of significant debate amongs leading economists - see the report on Rewriting the Rules for the American Economy. European economies have followed suit, and we know what has happened there. China is now following that prescription. It is great that India is not taking that path. And I appreciate and commend the efforts of the Governor RBI in maintaining the independent path, despite internal pressures from the government and industry.
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