Asserting that the economy is fundamentally sound,Raghuram Rajan Wednesday unveiled a bold blueprint for the financial sector,hours after taking over as the new governor of Reserve Bank of India. Express Editorial: Raghuram Rajan must first stabilise the economy My sense is that we certainly dont need false optimism. But I think there is good reason to believe the future of the country is strong, he said in his first media interaction. Raghuram Rajan takes over as 23rd Governor of RBI Rajans decisions included immediately rolling back some of the capital controls introduced a month ago - that had sent the rupee spiraling downwards - by exempting spending abroad for education and medical treatment from the annual limit of $75,000 per person. Express Opinion: New RBI governor must change policy He has also permitted companies to borrow overseas for general corporate expenses,a window that will reduce their cost of credit and offered to create more space for trading in rupees to establish it as the currency of choice for international trade from India. I wont read too much into their statement, Rajan said on the renewed risk of a possible downgrade in Indias credit rating by Standard & Poors. The 50-year-old University of Chicago economist also said he was not here to win popularity as the new governor. The governorship of the central bank is not meant to win votes or Facebook likes, he said,even as he made it clear he expected the RBI to change to take on the fast-growing expectations of Indias large population of young people. Change is risky. But as India develops not changing is even riskier, Rajan said. I wont read too much into their statement, Rajan said on the renewed risk of a possible downgrade in Indias credit rating by Standard & Poors. The 50-year-old University of Chicago economist also said he was not here to win popularity as the new governor. The governorship of the central bank is not meant to win votes or Facebook likes, he said,even as he made it clear he expected the RBI to change to take on the fast-growing expectations of Indias large population of young people. Change is risky. But as India develops not changing is even riskier, Rajan said. New RBI Governor Raghuram Rajan: Quotes For the first time in the history of the RBI,a new governor has spelt out a detailed plan of action and promised more in the mid-quarter policy statement. He has also postponed the date for the announcement of the statement to September 20 from 17. The governor also promised to introduce an inflation indexed savings certificate that people can use as a hedge to protect their savings,announced plans for a national Indian bill payment system through which payment of utilities such as school fees and medical bills can become easy,and create room for mobile-based electronic fund transfer without involving banks. The RBI has so far been lukewarm to this idea. Rajan made it clear he wants the central bank to focus on fewer roles and shed the ponderous oversight it has established over the financial system. He is making clear the bank will move more towards inflation targeting using the consumer price index as the measure, said Saugata Bhattacharya,chief economist of Axis Bank. Rajan also said the primary role of the central bank is to ensure monetary stability to sustain confidence in the value of the rupee. Ultimately,this means low and stable expectations of inflation,whether that inflation stems from domestic sources or from changes in the value of the currency,from supply constraints or demand pressures, he said. Among other measures,he said the highest standards of transparency and integrity will be exercised in the award of bank licences and freed existing banks from having to approach the RBI for licence to open branches.
