Published On : Fri, Jun 24th, 2016

No immediate cause for worry, says Rajan as Rupee hits 4-month low

RBI-raghuram-rajanMumbai: Reserve Bank Governor Raghuram Rajan on Friday said that the central bank is continuously maintaining a close vigil on the market developments, both domestically and internationally, and will take all necessary steps, including liquidity support (both dollar and rupee), to ensure orderly conditions in financial markets.

“The Indian economy has good fundamentals, low short term external debt, and sizeable foreign reserves. These should stand the country in good stead in the days to come,” the RBI chief said.


— There is no immediate cause for worry.

— We are prepared in terms of outflows. We have been taking delivery of currency over time. When the time comes we will have additional dollars to repay whatever deposits go out.

— Volatility happens in every market. These are all interconnected markets and there will be concerns. India is less exposed to the external sector. We are not a significant commodity exporter. The economy itself is on a stronger growth tangent.

— We will not be immune to those consequences (of Brexit). After initial concerns money should return.

— Investment to the UK will get affected because of the ease of entry. Some frictions may develop over time, but not immediately.

— Rupee has been relatively well behaved, unlike say the Mexican Peso or the Pound.

— The central bank can inject liquidity.

— Brexit has adverse consquences for global growth. It puts more of an onus on authorities to ensure there is no copy cat effect in the world. That there is no effect on trade, capital flows, immigration. Popular and political support for keeping an open world should happen.