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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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Government Seeks Reply From TikTok, Asks to Answer Queries or Face Ban

In April this year, the Madras High Court had passed an interim order banning TikTok citing inappropriate and pornographic content. The ban was subsequently lifted

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tik tok
TikTok is fast catching up: it has been downloaded more than 240 million times in India so far, according to app analytics firm Sensor Tower. VOA

The Ministry of Electronics and Information Technology (Meity) has sought response from controversial social media apps TikTok and Helo on a set of questions, ranging from whether the apps are considering storing data within India and what measures they were taking to prevent users below age 18 from getting exposed to potentially dangerous content.

The social media platforms have time till July 22 to reply to the questions or face ban in the country, according to sources.

The notice was sent to the operators of the apps on Wednesday after Rashtriya Swayamsevak Sangh’s (RSS) economic wing Swadeshi Jagran Manch (SJM) sent a letter to the Prime Minister, alleging that these social media platforms were being used for anti-national activities.

The IT Ministry asked what data from users in India are being collected by these platforms.

It also sought clarifications on allegations that the Helo app had paid a huge sum for putting 11,000 morphed political ads on other social media platforms.

One particular focus of the questions were around the security of users below age 18. Specifically, it asked what was the rationale behind the minimum age limit (13) to use TikTok in India when “a person below 18 is considered as child in the country”.

TikTok
The logo of the TikTok application is seen on a screen in this picture illustration taken Feb. 21, 2019. VOA

TikTok introduced “age gate” to restrict children from using the app. The ministry asked whether this age gate mechanism restricts users below age 18.

In a statement shared with IANS, TikTok said it welcomes the “opportunity to fully collaborate with the government to meet and exceed our obligations”.

“India is one of our strongest markets and we are happy to be part of the mainframe of Digital India in 15 Indian languages,” TikTok said in a statement.

“In line with our commitment to India, we are investing $1 billion in India over the next three years, with a strategic focus on developing technology infrastructure, establishing local partnerships and supporting initiatives such as the Skill India Program which we are proud to be assisting with already,” said the short-video-sharing app owned by Chinese start-up ByteDance.

Also Read: Samsung Refreshes its Galaxy A Series in India

The operators of TikTok earlier this year agreed to pay $5.7 million to settle the US Federal Trade Commission (FTC) allegations that the company illegally collected personal information from children.

In April this year, the Madras High Court had passed an interim order banning TikTok citing inappropriate and pornographic content. The ban was subsequently lifted. (IANS)