Economy
India has forex reserves to stabilise currency volatility: RBI
As the rupee hit a new low and the stock market took a tumble, Reserve Bank of India (RBI) Governor Raghuram Rajan said on Monday that India has sufficient foreign exchange reserves to prevent volatility in the currency market.
 
India has foreign exchange reserves of around $380 billion and these would be used if needed to subdue the volatility in the currency market, he said on the sidelines of a banking conference here.
 
Speaking at the conference, Rajan referred to his earlier comments that the central bank was not a cheerleader for the economy and said it was not for the RBI to lift sentiments unduly to deliver booster shots to the stock markets.
 
"We do not have to look too far beyond our borders to see the consequences of such boosts. Rate cuts should not be seen as goodies that the RBI gives out stingily after much public pleading," Rajan said.
 
"Instead, what is important is sustained low inflation, something the prime minister emphasised in his Independence Day speech, and rate cuts are a natural consequence that the RBI has no hesitation in delivering," Rajan added.
 
He said there was much to be optimistic about the economy.
 
"The Indian economy is full of possibilities, even as much of the world is mired in pessimism. Indeed, I have been arguing that the fragility of the world economy is precisely because it has focused on quick fixes rather than deep reform," Rajan said.
 
"The question for us as a society is whether we have the discipline to do what is necessary at a time when global conditions are propitious - commodity prices look like they will stay low for a time, helping the fight against inflation, and there is plenty of money around the world and at home, looking for investments, including in distressed assets, that can help us clean bank and corporate balance sheets," he said.
 
According to him, what sets poor nations apart from the rich was not people or resources or even luck but good governance, which comes from strong frameworks and strong institutions.
 
"A summary explanation of the economic problems of the recent past is that they arose because India outgrew its institutions. A summary of the government and the Reserve Bank's measures to restore sustainable growth is that we are building the necessary institutions," Rajan said.
 
Referring to the falling global trade, Rajan said the domestic demand has to be increased while avoiding the booms and busts that typically plague such efforts by emerging markets.
 
According to him, structural reforms will help strengthen the domestic demand growth and cited measures like Indradhanush of the central government for the banking sector, and licensing of payment banks by RBI.
 
Rajan said new small finance banks would be licensed next month and two new universal banks are launching next month.
 
According to the RBI governor, the economy has come a long way since the difficulties in 2012-13 though three areas are still "works-in-progress" from the RBI's perspective.
 
"First, economic growth is still below levels that the country is capable of. Second, while consumer price inflation has moderated, inflation expectations among the public are still high, creating a gap between the real rates that savers expect and the rates corporations think they pay. Third, stressed assets in the financial system continue to be high, which holds back growth and new lending, even while dampening bank incentives to cut base rates," the RBI governor said.
 
Rajan said the short term macroeconomic priorities of RBI are: help bringing down inflation and work with the government and banks to resolve the issue of distressed projects and cleaning up bank balance sheets.
 
On dealing with distressed assets, Rajan said the RBI had ended the forbearance accorded to restructured loans, which would now be classified as non-performing loans. However, RBI has made it easier to recognise and deal with distressed projects. In other words, while ending forbearance, we have introduced flexibility for those who recognise and deal with stressed assets," he said.
 
According to Rajan, companies in some sectors were in real distress and some could survive with government help while others were unviable, for which too much help to unviable firms could also cause distress to spread to healthy firms. 
 
In this regard, the country needed rapid progress in the coming year on the creation of institutions necessary for resolution such as the new Bankruptcy Code and the Company Law Tribunals that would administer it as well as the Financial Resolution Authority (for resolving financial institution distress), the RBI governor said. 

 

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COMMENTS

Meenal Mamdani

2 years ago

Excellent article. Indians are so lucky to have Rajan at the RBI.

As he says, stock market is not the economy. Few remember this mantra and hence the panic selling. Creates great opportunity for serious long term investors.

RBI under Rajan is focusing on exactly the right things to revive the economy. And I am glad that he has stood his ground under pressure from the govt and the corporates.

Indian shares tank, key index sheds 1,000 points
The rupee also hit a fresh two-year low of 66.47 to a dollar
 
Weak global cues and a steep fall in Shanghai stocks, along with concerns over the Indian government's stand on minimum alternate tax (MAT) shaved 1039.34 points, or nearly 3.80 percent, off a key equity index of the Bombay Stock Exchange (BSE) at noon on Monday.
 
The rupee also hit a fresh two-year low of 66.47 to a dollar.
 
The 30-share sensitive index (Sensex) of the BSE opened sharply lower at 26,730.40 points against the previous close at 27,366.07, plummeted further to 26,326.73 points (12.01 p.m.), to log a loss of 1,039.34 points, or 3.80 percent.
 
The wider, 50-scrip Nifty of the National Stock Exchange, followed a similar trend and was ruling at 7,985.30 points, with a loss of 314.65 points or 3.79 percent.
 
Each of the 30 shares that go into the Sensex basket, was trading in the red - the lowest loss being 1.33 percent for Hindustan Unilever and the steepest for the state-run GAIL India at 6.98 percent.
 
The realty stocks were the worst hit. The index for this sector was down 6 percent, followed by a loss of 5.40 percent for power, 5 percent for oil and gas, 4.77 percent for banking and 4.45 percent for capital goods.
 
Besides global developments, analysts cautioned that the slide in the rupee value, which closed on Friday at a two-year low of 65.83 to a dollar to breach the 66-mark, also dampened sentiments.
 
"The continued sell-off in the US markets reflects the recent downward momentum for the markets which came amid overarching concerns about developing economies and the outlook for US interest rates," Angel Broking said in a statement.
 
The carnage in the global equities market had its effect on stake sale in the state-run oil refiner-retailer Indian Oil Corp that was subscribed around 55 percent, four hours after bidding began at 9:15 pm. The stock was also quoting below the floor price.
 
At 1:15 p.m., bids were received for 13.96 crore shares, representing 57.5 percent of the 24.28 crore shares which the government proposes to divest at a floor price of Rs.387 a piece. At the Bombay Stock Exchange, around that time, the company's share was quoting at Rs.380.45.
 
The retail portion barely managed around 6 percent, even though the government has offered set aside 20 percent of the shares for them at a discount of 5 of the Cut off price. The non-retail portion fared better with around 70 percent subscription.
 
Bidding closes at 3:30 p.m.
 
The current government holding in Indian Oil Corp, the largest oil retailer in thde country, is 68.57 percent and the proposal is for divesting another 10 percent to raise at least Rs.9,400 crore, taking into accout the floor price of Rs.387 per share. 

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The Forever Fight against Ageing
Only holistic measures to improve one’s consciousness will help, not young blood or young girls
 
A friend of mine sent me an interesting article written by a journalist, Ian Sample, on the above-mentioned subject. At first, I thought the idea is novel and should be a do-able proposition. Later, I realised how foolish the idea was. The article was about an ‘earth-shaking discovery’—that infusing young blood into old/elderly is the treatment for old-age diseases; it also makes the recipient younger morphologically! For a lay-reader, this is very exciting. Who wants to grow old and die? 
 
History is replete with such crazy ideas. The elderly have been getting blood of the youth transfused into themselves, in the hope of staying eternally young—and immortal. All of them came to grief, though. There have been attempts at sleeping with young girls to get ‘rejuvenated’. Most, of course, went to their Maker a bit prematurely, some thanks to sexually transmitted diseases. Our memories are fresh about the macabre stories of young children being kidnapped for sacrificing them to supply blood for the rich old people. 
 
In January 2014, Wyss-Coray set up Alkahest, a company that aims to separate plasma into its constituent parts and combine them into a potent, rejuvenating cocktail. Wrote Ian Sample, “In Silicon Valley, scientists frequently launch start-up companies on the back of early-stage research—an alignment of the commercial and the scientific that some researchers still frown upon.” Sergio Della Sala, a professor at the University of Edinburgh, warns that it can raise a conflict of interest. “Science should first understand then sell,” he said. “We should always be sceptical when these two factors are reversed.” Unfortunately, that is exactly Western reductionist science is all about! Any scientific discovery that has a business possibility even attracts the attention of the Nobel committee. 
 
Real science, or what is called ‘The Reality’, is totally different. The human body cannot be cured or rejuvenated by any one of these reductionist methods. Human body is but the human mind or human consciousness. It can be preserved or rejuvenated by changing the human mind to be altruistic. Pain, even of the severest variety, could be controlled by our own mind helping our forebrain to produce powerful opioids and not by reductionist chemical pain-killers as the layman thinks. Ageing reversal also could be done through our consciousness. Mindful meditation has been scientifically demonstrated to increase the length of the telomeres—the circular bands at the end of chromosomes which keep becoming shorter as age advances. It is believed that this process can reverse ageing.
 
History tells us that if man becomes tranquil and keeps his intellectual powers at the highest level, s/he does not age as fast as those who do not pursue intellectual excellence. Seventeenth century Edinburgh was called the ‘Athens of the North’ with many top intellectuals residing there. Medical history of those times has recorded that some of those people suffered from killer diseases like the plague, smallpox, cholera and typhoid but lived, all the same, into their 90s in good health with their intellects still alert and sharp! Khushwant Singh and Shivaram Karanth are among the few who come to mind immediately; they lived long with clear minds and sharp intellect. 
 
Only holistic measures to improve one’s consciousness (mind) will help and not young blood or young girls. The latter idea could be dangerous as it might bring back the macabre scene of children being kidnapped to keep our greedy rich people alive by our greedy middlemen and even doctors!
 
“Liberate the minds of men and ultimately you will liberate the bodies of men.” — Marcus Garvey

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