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| Raghuram Rajan Says It's Not |
| Raghuram Rajan Says It's Not The Regulator's Job to Boost Sensex
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| INDIA
, 12-December-2014
5:23:13 AM |
| Governor Raghuram Rajan on Friday addressed India's top corporates on issues confronting the domestic and global economies. His speech came at a time when both the government as well as India Inc. have been gunning for a rate cut in view of the sharp slowdown in inflation.
Here are the important highlights of Dr Rajan's speech:
1) Boosting markets not the regulator's job: The RBI Governor stood his ground on interest rates and said central bankers have to go against popular opinion. The role of a regulator is not to boost Sensex, he said. Higher Sensex can at best be a collateral benefit not a primary objective... the underlying growth is more important, he added.
2) No tradeoff between inflation and growth: Dr Rajan said a central bank focused on containing inflation will ensure best conditions for sustainable growth. He added that "a glide path" towards lowering inflation to those levels worked best for India by ensuring moderate economic growth.
3) "Make for India" also important: For "Make in India" to succeed, the government needs to implement ambitious infrastructure plans and reduce the cost of doing business in India, Dr Rajan said. But "Make for India" is equally important because external demand is weak, he said.
4) India does not need to go out of the way to get foreign investors: "If we make it easier for young companies to do business in India, it will create a transparent and quick system and will do the same for foreign investors," Dr Rajan said.
5) Need for fiscal prudence: Noting that the new government has indicated that it will stick to the fiscal consolidation path, the RBI governor proposed a debate on whether India needed more institutions "to ensure deficits stay within control and the quality of budgets is high."
6) India needs foreign finance, but the best bet to attract foreign investment is through long-term equity or foreign direct investment, he said. FDI also brings new technologies and methods, Dr Rajan added.
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