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Modi ahead of us … visits need to be backed up with action on ground: Raghuram Rajan

Reserve Bank Governor Raghuram Rajan today described Prime Minister Narendra Modi as being "ahead of us" but said his visits abroad need to be backed up with "action on the ground".

By: Express News Service | New Delhi |
Updated: October 1, 2015 2:34:10 am
RBI, Raghuram Rajan, RBI governor, Indian economy, interest rates, inflation rate, Monetary Policy Framework, RBI, wholesale price index, WPI, consumer price index “What we need to do is back up his visits with action on the ground which reinforces the good impression that is created,” Rajan said.

Reserve Bank of India Governor Raghuram Rajan on Wednesday acknowledged Prime Minister Narendra Modi’s initiatives abroad to market India as an attractive investment destination but said that the “idea of India as a strong economy” has to be backed up with “action on the ground”.

Describing the Prime Minister as “an articulate spokesperson for India”, Rajan said, in an interview to NDTV: “I think he (the PM) is ahead of us. So we have to come up to speed in a number of dimensions. For example, if the idea of India as a strong economy is sold outside and they come in, and they don’t find the ease of doing business, the permissions, etc. people aren’t happy.” If it is known abroad that there are some issues that they have to deal with, it should not be worse than their expectations, he said. Rajan’s remarks come a day after his 50-basis-point cut in the key policy rate. “I think we need to steadily improve the reality on the ground, this attempt to improve the business environment which is proceeding on many fronts is I think a great step in the right direction,” he said.

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“The world view of India is changing positively,” he said. “The Prime Minister is an articulate spokesperson for India but … need to back up PM’s visits with action on the ground which reinforces the good impression he is creating.” The latest ranking by the World Bank in its Ease of Doing Business Report, 2015, shows that India has slipped two notches to 142 out of 189 countries compared to 140 in 2014.

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Overseas investors are keen on putting their money in what is one of the fastest growing economies of the world at a time when prospects of a global economic recovery appears bleak. But they have often complained about hurdles such as delays in approvals besides lack of clarity on tax policies.

The relationship between the RBI and the Centre has been strong, Rajan said, going on to add that he did not always agree with the finance minister’s point of view. “Otherwise, the public should start getting worried that the central bank is becoming too acquiescent. In a sense, we have to be a gatekeeper and sometimes say no,” he said. On India Inc, Rajan said, “industry should not wait for government actions … PM had an important message for industry — business is not risk free. Industry has to take a plunge … Things are moving in the right direction. Those who move in early will reap the rewards.”

The RBI chief had praise for the Centre on food management saying that “two tough monsoons and moderation in food prices is very creditable for the government. Food management … has been extremely good. The government needs to make us even more independent to vagaries of the weather.” Days ago, Rajan had urged India Inc to shed its “jugaad” mindset, its search for quickfix and, prepare for the long haul.

On whether “China’s pain is India’s gain”, Rajan said: “I think it is taking it a bit too far, I think no country does better because some other country does badly. We will be hurt if China does really badly, we would want China to recover. But there are offsetting benefits to the costs that are imposed by such a slowdown. One of the benefits is we import substantial amount of commodities which China was importing… if China imports less of those, our producers have lower

input costs.” Asked about his message to the government Rajan said “ keep doing what you are doing” while to the common man it was “we are on the verge of great things, but we cannot assume we are there.”

More banks slash lending rates

Mumbai: A day after the RBI slashed the repo rate by 50 basis points and State Bank of India followed with a 40 bps cut in lending rate, more banks joined the rate cut bandwagon.

IDBI Bank, Axis Bank, Punjab National Bank, Bank of Baroda and Oriental Bank of Commerce have trimmed their base rate, or minimum lending rate, by up to 0.40 per cent.

Axis Bank cut its base rate by 35 bps to 9.50 per cent. IDBI’s base rate will be cheaper following a 25 bps cut to 9.75 per cent with effect from October 5, 2015. Punjab National Bank cut the base rate by 40 bps, Bank of Baroda by 25 bps, while Oriental Bank of Commerce slashed by 20 bps.

BoB also reduced the Benchmark Prime Lending Rate by 25 bps from 14.15 per cent to 13.90 per cent. It will be effective from October 5.

Banks are also cutting the deposit rate to balance the cost of funds. IDBI will reduce the retail term deposit rates in select buckets by 25-50 bps with effect from October 5. ENS

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