India’s new Central Bank Governor hits the right notes

NEW DELHI - Living up to his reputation, Dr. Raghuram Rajan (former IMF Chief Economist and Economic Advisor to the Government) hit the right notes on his first day as the Reserve Bank of India’s new Governor. Amid continued currency pressures and slowing growth, Rajan made clear his intention to bolster the rupee’s stability by deepening financial markets and easing external financing constraints, announcing more steps to attract capital inflows and boost demand for the domestic currency.

Rajan lifted hopes that the RBI will accelerate the opening of India’s financial sector. However, BBVA Bank sayd it is recognised by many market observers that arresting India’s economic woes will take more than the work of the RBI alone.

“In particular,” BBVA says, “ the Government will need to do its part to reduce the fiscal deficit in line with previously announced targets, and restore investor confidence by implementing structural reforms. Specifically, actions are needed to reduce diesel fuel subsidies, alleviate food and raw material supply bottlenecks, and speed up infrastructure projects. It will also be important to implement recently passed reform bills (including the Food Security Bill, Land Acquisition bill and Pension Reforms) coherently, and to keep renewed fiscal pressures in check. Given these challenges, the expected pickup in growth will take time and the outlook if fraught with downside risks.:  www.bbvaresearch.com (ATI).