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Modi government came in power with a ‘probably unrealistic’ promise: RBI Governor Raghuram Rajan

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By NewsGram Staff Writer

Addressing the audience of the Economic Club of New York on Tuesday, Reserve Bank of India (RBI) Governor, Raghuram Rajan, said that the Modi Government came in power with a ‘probably unrealistic’ promise, but the government is taking steps to create an environment for investment and is “sensitive” to the concerns of investors.

“The government has taken steps to create the environment for investment, which I think is important,” said RBI Governor.

Rajan said that the government is creating an environment for investors and that will be a boon for thousands of unemployed youths of India. A “big part” of the business environment is taxes and the government has made it clear that it will not bring retrospective taxation again.

“However, once the tax authority levies a demand on you, there is a quasi-judicial nature of that proceeding and therefore it has to go through the courts before it is resolved. The government cannot intervene,” Rajan added, while adding, “Legacy issues are winding their way through the courts, including issues based on laws that existed before they were changed.”

Rajan also praised government’s different policies from Land Acquisition Bill to monetary reforms.

He said that since different states have their own Land Acquisition Bills, some commentators have suggested the possibility that the states should decide for themselves as to how to implement their respective land acquisition provision, as per the report of The Financial Express.

He stated that inflation “has come down tremendously in India” and the rupee has basically stayed relatively flat since the beginning of the year.

“If you look at rupee’s volatility relative to other currencies, you’d have to argue that the rupee has been one of the most stable currencies (against) the dollar,” Rajan said.

The RBI governor’s statement came in the note of Modi’s one year in office.

Rajan commented, “It is appreciable the way the government tried to implement its ‘probably unrealistic’ promise and to create a friendly relation with its neighbors.”

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RBI Won’t Hesitate on Steps for Financial Stability, Says Governor

Das further said that in a flexible inflation targeting framework, a delicate balance needs to be maintained between inflation and growth objectives

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Reserve Bank of India. VOA

Assuring the crisis-hit NBFC sector will be monitored, Reserve Bank of India Governor Shaktikanta Das on Friday said the central bank will not hesitate to take any required measure to maintain the financial stability of the economy.

In a lecture at the Lal Bahadur Shastri National Academy of Administration, Mussoorie, on the “evolving role of central banks”, Das also said that financial stability is major factor considered in the RBI’s monetary policy.

“In the non-banking sector, the Reserve Bank has recently come out with draft guidelines for a robust liquidity framework for the NBFCs. We are also giving a fresh look at their regulatory and supervisory framework. It is our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust,” he said.

“The Reserve Bank will continue to monitor the activity and performance of this sector with a focus on major entities and their inter-linkages with other sectors. The Reserve Bank will not hesitate to take any required steps to maintain financial stability,” he added.

Reserve Bank of India. Wikimedia Commons

The liquidity crisis in the non-banking financial companies (NBFC) came to light when IL&FS defaulted on a commercial paper in September.

Das further said that in a flexible inflation targeting framework, a delicate balance needs to be maintained between inflation and growth objectives.

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“Post global financial crisis, it has been recognised that price stability may not be sufficient for financial stability and therefore financial stability has emerged as another key consideration for monetary policy, though jury is still out as to whether it should be added as an explicit objective of monetary policy.

“The fact remains that though the focus of monetary policy is mainly on inflation and growth, the underlying theme has always been financial stability,” the Governor said. (IANS)