Raghuram Rajan meets PM, finance minister; FIIs buy shares worth $1 billion
Prime Minister Manmohan Singh with RBI governor Raghuram Rajan on Septmeber 17, 2013. (PTI photo)
NEW DELHI: Ahead of his maiden monetary policy review, Reserve Bank governor Raghuram Rajan on Tuesday met Prime Minister Manmohan Singh and finance minister P Chidambaram and discussed the macroeconomic situation.
"RBI has constant consultation with finance ministry. This meeting was part of that. We discussed the whole gambit of issues," he told reporters after meeting Chidambaram.
Sources said during his meeting with the Prime Minister, the governor discussed the state of the economy and steps required to address the current slowdown and high inflation.
Rajan, who was chief economic advisor in the finance ministry before taking over as RBI governor on September 4, is scheduled to announce the mid-quarter monetary policy review on September 20.
All eyes are on the policy announcement considering the inflation climbing to six months high of 6.1 per cent in August, concerns on depreciating rupee and slowing growth.
High inflation offers Rajan limited scope to cut key rates as demanded by industry.
Soon after being named for the new assignment, Rajan had said there was no "magic wand" to pull the economy instantly out of challenges it faces.
"We have recommended a cut in CRR, repo rate and asked RBI not to restrict the MSF (marginal standing facility) to a particular number ..." State Bank of India (SBI) chairman Pratip Chaudhuri said.
As the peak festival season is around the corner, bankers are pressing for a cut in cash reserve ratio and policy rates by the Reserve Bank to boost demand for manufactured goods and revive sagging economic growth.
Demand for loans are expected to go up in the ensuing festive season and banks would be able to disburse loans at the lower rate if RBI cuts rate, Indian Overseas Bank Chairman and Managing Director M Narendra said.
In its last policy review on July 29, RBI chose to keep all key interest rates unchanged on account of weak rupee.
Markets have given a thumbs up to Rajan's road map to revive the economy, with the rupee coming off its record low.
FIIs buy shares worth $1 billion
Foreign institutional investors (FIIs) have bought shares worth $1 billion in the past eight trading sessions following RBI governor Raghuram Rajan's recent announcements, a Deutsche Bank report said.
According to the global financial services major, FIIs have recouped around 25 per cent of the outflows seen over the June-August period, when the country witnessed its sharpest bout of FII outflows since the global financial crisis.
Between June and August 2013, India saw FII outflows of $4 billion, leading to fears of a possible capitulation by FII's, the Deutsche Bank report said.
"Following incoming governor Raghuram Rajan's announcements on assuaging currency markets and particularly after the news flow over the FCNR-B swap announcements, we have seen the rupee partially recovering its losses and FII's emerging as net buyers of close to USD 1 billion over the past 8 trading sessions," Deutsche Bank said.
As per the report, investor sentiments were boosted following the recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets.
These measures have resulted in imparting "long needed and much sought after credibility over both - the financing of the CAD and the actual CAD," Deutsche Bank said adding a tempering of the Syria risk have also assuaged investors, aiding inflows.
Moreover, investors are keenly expecting a fuel price hike (both one time as well as a higher monthly calibrated hike). "Convergence of political will on critical economic issues also bodes well," it said.
The rupee is currently, hovering around the 62/dollar level. The local currency had depreciated to an all-time low of 68.85 on August 28.
Citing anecdotal evidence, HSBC said bouts of sharp currency depreciation in India have generally been followed by periods of strong FII inflows into equities.
Earlier, between September and December 2011, a rupee depreciation of 13 per cent was followed by a period of FII inflows of USD 8 billion over the next three months.
Similarly, rupee depreciation of 11 per cent over March-June 2012 was followed by FII inflows of USD 6 billion over next three months.
"Investors are now watching both the Fed policy on September 18th and more importantly the RBI credit policy on September 20th," the report said.
![Photo: Monetary policy: Raghuram Rajan seen hawkish on debut, may roll back some FX steps New Reserve Bank of India chief Raghuram Rajan makes his first monetary policy statement on Friday with expectations he may scale back some of the emergency measures that have helped the rupee bounce from a record low. But in a reflection of the policy challenges faced by the former IMF chief economist who has been dubbed "The Guv" by the Indian media, Rajan is likely to strike a hawkish tone on inflation. With price pressures rising and economic growth running at a decade low, Rajan must find a fine balance in central bank policies to support economic activity without adding fuel to inflation and giving investors fresh reason to sell the currency. "There is a change of guard, so we don't know what the flavour will be, but Rajan is likely to be hawkish and reiterate the importance of low and stable inflation for sustained economic recovery," said Rajeev Malik, senior economist at CLSA in Singapore. Famed for predicting the global financial crisis, Rajan took office at the Reserve Bank of India (RBI) on September 4 as India was confronting its biggest economic crisis since 1991 and wowed central bank-watchers with an action plan on his first day. Since hitting a record low on August 28, marking up losses of about 20 per cent for the year, the rupee has strengthened by 9 per cent. Rajan, 50, pushed back his maiden policy review by two days and will now follow the pivotal meeting of the U.S. Federal Reserve, which later on Wednesday is widely expected to announce a winding down of its extraordinary monetary stimulus.]()
"RBI has constant consultation with finance ministry. This meeting was part of that. We discussed the whole gambit of issues," he told reporters after meeting Chidambaram.
Sources said during his meeting with the Prime Minister, the governor discussed the state of the economy and steps required to address the current slowdown and high inflation.
Rajan, who was chief economic advisor in the finance ministry before taking over as RBI governor on September 4, is scheduled to announce the mid-quarter monetary policy review on September 20.
All eyes are on the policy announcement considering the inflation climbing to six months high of 6.1 per cent in August, concerns on depreciating rupee and slowing growth.
High inflation offers Rajan limited scope to cut key rates as demanded by industry.
Soon after being named for the new assignment, Rajan had said there was no "magic wand" to pull the economy instantly out of challenges it faces.
"We have recommended a cut in CRR, repo rate and asked RBI not to restrict the MSF (marginal standing facility) to a particular number ..." State Bank of India (SBI) chairman Pratip Chaudhuri said.
As the peak festival season is around the corner, bankers are pressing for a cut in cash reserve ratio and policy rates by the Reserve Bank to boost demand for manufactured goods and revive sagging economic growth.
Demand for loans are expected to go up in the ensuing festive season and banks would be able to disburse loans at the lower rate if RBI cuts rate, Indian Overseas Bank Chairman and Managing Director M Narendra said.
In its last policy review on July 29, RBI chose to keep all key interest rates unchanged on account of weak rupee.
Markets have given a thumbs up to Rajan's road map to revive the economy, with the rupee coming off its record low.
FIIs buy shares worth $1 billion
Foreign institutional investors (FIIs) have bought shares worth $1 billion in the past eight trading sessions following RBI governor Raghuram Rajan's recent announcements, a Deutsche Bank report said.
According to the global financial services major, FIIs have recouped around 25 per cent of the outflows seen over the June-August period, when the country witnessed its sharpest bout of FII outflows since the global financial crisis.
Between June and August 2013, India saw FII outflows of $4 billion, leading to fears of a possible capitulation by FII's, the Deutsche Bank report said.
"Following incoming governor Raghuram Rajan's announcements on assuaging currency markets and particularly after the news flow over the FCNR-B swap announcements, we have seen the rupee partially recovering its losses and FII's emerging as net buyers of close to USD 1 billion over the past 8 trading sessions," Deutsche Bank said.
As per the report, investor sentiments were boosted following the recent announcements over the FCNR-B, supportive trade data and easing investment facilitation in debt markets.
These measures have resulted in imparting "long needed and much sought after credibility over both - the financing of the CAD and the actual CAD," Deutsche Bank said adding a tempering of the Syria risk have also assuaged investors, aiding inflows.
Moreover, investors are keenly expecting a fuel price hike (both one time as well as a higher monthly calibrated hike). "Convergence of political will on critical economic issues also bodes well," it said.
The rupee is currently, hovering around the 62/dollar level. The local currency had depreciated to an all-time low of 68.85 on August 28.
Citing anecdotal evidence, HSBC said bouts of sharp currency depreciation in India have generally been followed by periods of strong FII inflows into equities.
Earlier, between September and December 2011, a rupee depreciation of 13 per cent was followed by a period of FII inflows of USD 8 billion over the next three months.
Similarly, rupee depreciation of 11 per cent over March-June 2012 was followed by FII inflows of USD 6 billion over next three months.
"Investors are now watching both the Fed policy on September 18th and more importantly the RBI credit policy on September 20th," the report said.
Monetary policy: Raghuram Rajan seen hawkish on debut, may roll back some FX steps
New Reserve Bank of India chief Raghuram Rajan makes his first monetary policy statement on Friday with expectations he may scale back some of the emergency measures that have helped the rupee bounce from a record low.
But in a reflection of the policy challenges faced by the former IMF chief economist who has been dubbed "The Guv" by the Indian media, Rajan is likely to strike a hawkish ton...See More
New Reserve Bank of India chief Raghuram Rajan makes his first monetary policy statement on Friday with expectations he may scale back some of the emergency measures that have helped the rupee bounce from a record low.
But in a reflection of the policy challenges faced by the former IMF chief economist who has been dubbed "The Guv" by the Indian media, Rajan is likely to strike a hawkish ton...See More
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