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Fear Of Economic Volatility Raises as RBI Governor Decides To Resign

There has been widespread speculation that Rajan quit because of what some termed as “discouraging signals” from the government.

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Image Source: Financial Express
  • India is now the world’s fastest-growing major economy
  • Raghuram Rajan helped stabilize India’s currency when the rupee was plunging and inflation was raging
  • Praising Rajan’s contribution, Finance Minister Arun Jaitley expressed confidence his successor will be a “good person”

The Indian Central Bank governor’s decision not to seek a second term in office has raised concerns the country could face a loss in investor confidence and economic volatility. The widely-respected economist, Raghuram Rajan, is credited with making an important contribution to India’s economic turnaround after a choppy phase.In a signal of uncertainty looming ahead of his departure in September, the rupee fell to a one-month low Monday.

Rajan’s departure: not a big surprise

Rajan’s weekend announcement to quit came after weeks of speculation on whether the government will renew his tenure as head of the Reserve Bank of India (RBI). In a letter to his staff, Rajan said he had been open to staying on to see through the reforms he had begun, but that “on due reflection and after consultation with the government,” he was returning to his “ultimate home in the realm of ideas.”

Widely feted as one of the world’s best Central Bank governors, the former International Monetary Bank economist helped stabilize India’s currency when the rupee was plunging and inflation was raging. As growth momentum returned, the country regained credibility among international investors, who had turned their back on emerging economies.

India’s economy is soaring

While countries like Brazil and Russia continue to face hard times, India is now the world’s fastest-growing major economy.

Finance Minister Arun Jaitley sought to calm investors Monday telling a television network “the country’s economy is driven by strong fundamental factors.” Praising Rajan’s contribution, he expressed confidence his successor will be a “good person.”

Finance Minister Arun Jaitley speaks to RBI Governor Raghuram Rajan during a convocation ceremony for students at a university in Mumbai on January 9, 2015 Image Source: NDTV Profit

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Symbol of stability

The head of emerging market economics at JP Morgan, Jahangir Aziz, stressed that Rajan was a symbol of stability for many investors. “They have invested on the fact that India has managed to put together a reasonably strong story of macro-economic stability. Many of them associate that in part to the Reserve Bank of India, Raghuram Rajan.”

Aziz said investors will watch to see whom the government appoints as Rajan’s successor and would like to see continuity in policies. “The need of the hour is to calm down market nerves,” he says.

There has been widespread speculation that Rajan quit because of what some termed as “discouraging signals” from the government.

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There was criticism of Rajan

Rajan was not without his critics, who said his refusal to slash interest rates, and a clean-up of bad loans he was pushing at state-owned banks, were choking private investment. The most vocal attack came from a member of the ruling Bharatiya Janata Party, Subramaniam Swamy, who raised eyebrows with his comment that Rajan was “mentally not fully Indian” and complained that he had not acted to ease the heavy debt burden of many Indian companies.

Although India’s economy is growing at over 7 percent and has overtaken China as the world’s fastest growing economy, Rajan has repeatedly cautioned that India’s economic recovery still rests on fragile foundations.

Economist Rajiv Kumar at New Delhi’s Center for Policy Research said fears about the impact of Rajan’s exit could be overblown and pointed out that stock markets did not tank Monday as many had feared. “It’s institutions that matter, and the RBI has known to be a very competent institution with huge inherent strengths,” says Kumar.

Meanwhile, the government ushered in more economic reforms Monday, announcing sweeping changes to rules on foreign direct investment by opening up its defense and civil aviation sectors to complete outside ownership, and loosening some restrictions on the pharmaceutical and retail sectors.(Source :VOA)

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  • Vrushali Mahajan

    This is really sad to know. Rajan has helped the Indian economy soar high. He is a man with ambition and great personality. Also, IMF says India would outspace China’s slowing economy. So, this should be looked after.

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To Meet Increasing Demand Africa Needs to Quadruple Energy Investments

Africa's overall population is set to exceed 2 billion before 2040, accounting for half of the global increase over that period

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Africa, Energy, Investments
The number of people living in Africa's cities is expected to expand by 600 million over the next two decades, much higher than the increase experienced by China's cities during the country's 20-year economic and energy boom. Pixabay

Africa is set to become increasingly influential in shaping global energy trends over the next two decades as it undergoes the largest process of urbanisation the world has ever seen, a new report from the International Energy Agency (IEA) said on Friday.

‘Africa Energy Outlook 2019’, a special in-depth study, finds that current policy and investment plans in African countries are not enough to meet the energy needs of the continent’s young and rapidly growing population.

Today, 600 million people in Africa do not have access to electricity and 900 million lack access to clean cooking facilities.

The number of people living in Africa’s cities is expected to expand by 600 million over the next two decades, much higher than the increase experienced by China’s cities during the country’s 20-year economic and energy boom.

Africa, Energy, Investments
‘Africa Energy Outlook 2019’, a special in-depth study, finds that current policy and investment plans in African countries are not enough to meet the energy needs of the continent’s young and rapidly growing population. Pixabay

Africa’s overall population is set to exceed 2 billion before 2040, accounting for half of the global increase over that period.

These profound changes will drive the continent’s economic growth, infrastructure development and, in turn, energy demand, which is projected to rise 60 per cent to around 1,320 million tonnes of oil equivalent in 2040, based on current policies and plans.

The new report is the IEA’s most comprehensive and detailed work to date on energy across the African continent, with a particular emphasis on sub-Saharan Africa.

It includes detailed energy profiles of 11 countries that represent three-quarters of the region’s gross domestic product and energy demand, including Nigeria, South Africa, Ethiopia, Kenya and Ghana.

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The report makes clear that Africa’s energy future is not predetermined.

Current plans would leave 530 million people on the continent still without access to electricity in 2030, falling well short of universal access, a major development goal.

But with the right policies, it could reach that target while also becoming the first continent to develop its economy mainly through the use of modern energy sources.

Drawing on rich natural resources and advances in technology, the continent could by 2040 meet the energy demands of an economy four times larger than today’s with only 50 per cent more energy.

Africa, Energy, Investments
Today, 600 million people in Africa do not have access to electricity and 900 million lack access to clean cooking facilities. Pixabay

“Africa has a unique opportunity to pursue a much less carbon-intensive development path than many other parts of the world,” IEA’s Executive Director Fatih Birol said.

“To achieve this, it has to take advantage of the huge potential that solar, wind, hydropower, natural gas and energy efficiency offer. For example, Africa has the richest solar resources on the planet, but has so far installed only 5 gigawatts of solar photovoltaics (PV), which is less than one per cent of global capacity.”

If policy makers put a strong emphasis on clean energy technologies, solar Photovoltaic (PV) could become the continent’s largest electricity source in terms of installed capacity by 2040.

Natural gas, meanwhile, is likely to correspond well with Africa’s industrial growth drive and need for flexible electricity supply.

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Today, the share of gas in sub-Saharan Africa’s energy mix is the lowest of any region in the world.

But that could be about to change, especially considering the supplies Africa has at its disposal — it is home to more than 40 per cent of global gas discoveries so far this decade, notably in Egypt, Mozambique and Tanzania.

Africa’s natural resources aren’t limited to sunshine and other energy sources. It also possesses major reserves of minerals such as cobalt and platinum that are needed in fast-growing clean energy industries.

“Africa holds the key for global energy transitions, as it is the continent with the most important ingredients for producing critical technologies,” Birol said.

African countries are on the front line when it comes to climate change, meaning the continent’s energy infrastructure planning must be climate resilient.

“Even though Africa has produced only around two per cent of the world’s energy related CO2 emissions to date, its ecosystems already suffer disproportionately from the effects of a changing climate,” Birol added. (IANS)