At the book launch event of former Reserve Bank of India Governor Duvvuri Subbarao's Who Moved My Interest Rates, former Finance Minister P Chidambaram took part in a panel discussion and offered his take on some of contentious issues raised by the ex-central bank chief.
Admitting that the "action or inaction" of RBI during his tenure could have been among reasons for the present bad loan crisis, former governor D Subbarao today said he should have addressed those issues.
India should avoid fixating on an inflation target given the need to ensure economic growth and financial stability, former central bank governor Duvvuri Subbarao warned on Tuesday.
Terming Reserve Bank Governor Raghuram Rajan's decision to not seek an extension as 'surprising', his predecessor Duvvuri Subbarao says the economy would have been benefited immensely if he had continued.
"Both Chidambaram and Pranab Mukherjee were piqued by the Reserve Bank's tight interest rate policy on the ground that high interest rates were inhibiting investment and hurting growth," writes Subbarao, who manned the Mint Road during the global financial crisis and had a five-year tenure from September 5, 2008 to September 4, 2013.
Wondering whether the "textbook prescriptions" are relevant today, Kamath said those principles were laid down at a very different time, especially when markets were not as open as they are today.
Succeeding D Subbarao as the RBI Governor, Raghuram Rajan's immediate challenge will lie in restoring confidence in the rupee, which has been subject to consistent freefall.
As wholesale inflation started inching downward this summer, the Governor, a topper in the Civil Service exam in 1972, was faced with problem of falling rupee. Rupee against the dollar has depreciated over 20 per cent in the last three months and is at present hovering over 65 to the greenback.
The Reserve Bank of India's outgoing Governor Duvvuri Subbarao on Thursday emphasised the central bank's policy is not to resort to capital controls but said it must maintain its focus on stabilising markets.
The cash reserve ratio, or the amount of cash lenders must deposit with the Reserve Bank of India, stands at a record low of 4 percent. Meanwhile, the statutory liquidity ratio, which includes securities such as government bonds, stands at 23 percent.
Rajan said he does not have a 'magic wand' to cure the ills of the economy but promised to tackle the challenges by working closely with the government.
Raghuram Govind Rajan, the country's chief economic advisor to the Finance Ministry, will take up the mantle of governorship in the Reserve Bank of India (RBI) from September 5. The present incumbent - D Subbarao will demit his office on September 4, this year.
The RBI intervened in the foreign exchange market on Thursday to stop the rupee's slide toward a record low as its defence of the currency.
The UPA Government's proposed Food Security Bill carries a slew of "economic consequences", including pressures on fiscal deficit, growth and inflation, Reserve Bank Governor D Subbarao said today.
Vivek Rajpal, Rates Strategist, Nomura India believes that the liquidity tightening measures by RBI are temporary in nature. However, he does not expect any further tightening in the upcoming policy.
As Reserve Bank of India governor Duvvuri Subbarao is due to leave office, questions and speculations over his successor hover. Leading candidates such as Raghuram Rajan, Arvind Mayaram have propped up.
RBI Governor Subbarao had to cancel his visit to a Mumbai College after he was urgently called for a meeting with the finance minister and prime minister.
The comments on inflation being high sent benchmark 10-year bond yield up 3 basis points to 7.50 percent.
Canara Bank said on Thursday it will reduce its base rate by 30 bps from 10.25 percent to 9.95 percent.
The rupee had touched historic low of 60.76 level against the dollar on June 26 due to heavy capital outflows amid fears of early withdrawal of US monetary stimulus.
Earlier this week, the RBI said it had received 26 applications for new bank licenses.
The market will be carefully eyeing the RBI credit policy. A CNBC-TV18 poll of bankers and economists show that 70 percent of the respondents do not expect RBI to cut repo rate or the cash reserve ratio (CRR). Only 30 percent respondents expect a 25 basis points rate cut in the upcoming policy.
India's consumer price-led inflation was 9.39 percent in April, while the annual wholesale price-led inflation slipped below the crucial five percent threshold to 4.89 percent, also in April.
Foreign banks are operating in India by registering their branches, but without establishing subsidiaries.
Subbarao said if people thought that he was an inflation warrior to imply that he was targeting inflation regardless of all other concerns, then that would be misreading of RBI's policy calculations.