Growth not by RBI alone but by govt initiatives too: SBI

 In an interview to CNBC-TVB18 regarding the RBI initiatives announced today, Brinda Jagirdar, head - economic research, SBI explains that though the RBI announcements seen incremental, they're of great importance in instilling confidence into the economy and the market.

Jagirdar adds that growth cannot be restored by initiatives by the RBI alone, but by holistic economic packages by the government. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: Do agree that the sense on the street is that the measures announced today are incremental and not enough to boost confidence or turn sentiment?
A: Yes, I agree that the measures are incremental, but they’re also important- the RBI has taken steps to increase the supply of dollars to support the rupee without aggravating the liquidity situation and second, the RBI is preparing to improve the absorptive capacity of the economy.
I think the RBI is standing by to ensure that the incremental dollars flow into the sectors that are important for the economy such as manufacturing and infrastructure.
Lastly, the RBI has roped in long-term players, sovereign wealth funds, the insurance companies and the central banks. So I think the measures are positives for the economy. Q: Broadly, the measures were announced across three segments – the FII limit in government securities was hiked, the ECB limit was increased and the lock-in periods were relaxed. What, according to you, is the most important that will effectively change sentiment?
A: The RBI has clearly stated it will take action to support the rupee on a long-term basis. So, in that sense I am not disappointed that this is incremental. I think this is the only important fact going forward. Q: What are the other kinds of measures? Will it be another round of measures from the RBI? Will Delhi act? There is speculation that the RBI may announce NRI bonds. Do you believe that's a feasible option for the RBI?
A: It's still a little early, but I still think that it's in the realm of speculation till the rupee stabilises. Once that happens then we can look to NRI bond situation. But I think that again is a little premature.
It needs to be ascertained seen is where and how these funds will be deployed, at what rates these funds will be raised, the hedging mechanism and the party that will bear the currency risk. So, it's a little too early to talk about NRI bonds because we need to attend to bigger problems. Q: What is the outlook for the rupee? What is the kind of level you see for the rupee and do you believe it has bottomed out at these levels?
A: Today's measures were to instill a sense of confidence. The RBI wished to send out the message it is watching the market, ready to step in as and when required.
But the solution lies not in just the central bank action, but a whole package of measures that will restore growth in the economy and attract foreign flows on a long-term sustainable basis. So that’s where I think India is moving.