Story Indian rupee recovers, BSE Sensex surges as Raghuram Rajan takes charge at RBI

Indian markets today staged a smart pullback with the Indian rupee rebounding 56 paise to 67.07 and the Sensex surging 333 points on apparent hopes pegged on Raghuram Rajan taking over as RBI Governor. The BSE Sensex opened higher and moved in a range of 18,188.43 to 18,612.60 before settling at 18,567.55, a rise of 332.89 points or 1.83 per cent. Gains were led by metal, healthcare and auto stocks. Investors became richer by around Rs 1 lakh crore as overall 1,347 stocks rose on BSE.
New RBI Governor Raghuram Rajan: Quotes
Markets were relieved that reports of missile firings yesterday turned out to be tests carried out jointly by Israel and the US. Yesterday, Sensex fell 651 points to 1-week lows.
On the currency side, suspected intervention by the central bank helped the rupee retreat from near record lows and end at 67.07 against the dollar, up 56 paise. The rupee had lost 193 paise in previous two sessions.
Raghuram Rajan takes over as 23rd Governor of Reserve Bank of India
The strong show in the markets was a positive sign for
Raghuram Rajan, who took over at the helm of the RBI, which has been combating a currency slump, high inflation, low growth and a widening current account deficit.
Market participants are hopeful the new RBI Governor will draw upon his global experience to bring the economy back to a higher growth path and mount a more effective defence of the

Story Lok Sabha nod to Pension Bill

The long-pending Pension Bill, a key economic legislation assuring minimum returns to subscribers, was today approved by the Lok Sabha, with the government saying it is based on the principle that "you save while you earn". The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011, provides for market based returns and wide coverage based on several investment options in the pension sector with an aim to building confidence in the subscribers.
Govt to hike DA by 10%; to benefit 80L staffers, pensioners
It will have provision for withdrawals for limited purposes from Tier-I pension account, an incentive for subscribers to join the New Pension Scheme (NPS).
Replying to a brief debate, Finance Minister P Chidambaram said the government has accepted most of the recommendations of the Standing Committee.
Editorial: Pensioning off EPFO
The NPS, beneficial for employees in the long run, is based on the principle that "you save while you earn" especially for retirement period and is mainly for those who have a regular income, he said.
The corpus of the NPS having 52.83 lakh subscribers (including those of 26 state governments) was about Rs 35,000 crore.
PFRDA allows pension funds to invest in IDFs with caution
The bill also seeks to grant statutory status to the Pension Fund Regulatory and Development Authority.
"....Rs 35,000 crore should not be used by unstatutory authority...All this Bill does is make unstatutory authority (into) a statutory authority," Chidambarm said, adding the statutory authority will have powers to penalise.
The bill would also provide

Raghuram Rajan takes charge as new RBI Governor, unveils 'big package', vows more

New RBI Governor Raghuram Rajan today came out with a slew of measures, including more trade settlement in Indian rupees to rescue the battered financial markets and hinted at a shift in focus from inflation control, doggedly pursued by his predecessor, to boosting growth. Shortly after he took over as the 23rd Governor of the the reserve Bank of India (RBI), Raghuram Rajan, 50, addressed the media with a prepared statement in which he laid out a detailed road map for his innings in the short term, which he called a "big initial package."
He also rescheduled by a few days the date for his much-anticipated first monetary policy statement to September 20.
The new Governor set up a number of committees for revising and strengthening monetary policy framework, financial stability, financial inclusion, NPAs and an outside panel of experts headed by former Governor Bimal Jalan to screen applications for new bank licenses.
Rajan said the new bank licences will be issued around January next year.
Apparently reflecting a shift in the approach from his predecessor D Subbarao, who had serious differences with the government of late, Raghuram Rajan said the primary role of the bank is monetary stability to sustain confidence in the value of the Indian 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.
"...but we have two other important mandates; inclusive growth and development, as well as financial stability,"

PM-speak on rupee tumble does not have enough currency

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One area where policymakers have failed in recent years is their inability in continuing to attract long-term capital.

September 1, 2013:  

As Prime Minister Manmohan Singh embarks on an overseas visit this week to attend the G-20 Saint Petersburg Summit, he may pray and hope that the likely US action on Syria will delay the tapering of US stimulus.

The hope being that developments on Syria may prompt the US Federal Reserve to think twice about tapering in September.

For this past month, when rupee hit a record low against the dollar, Indian policy makers have tended to lay the blame for the fall in rupee on “external factors” such as the May 22 announcement of likely US stimulus tapering.

Seldom had one seen Indian policymakers and political leaders take ownership for their policy goof ups or for that matter even their policy inactions.

In this backdrop, the Prime Minister’s recent statement in Parliament on the rupee slide was seen more in the nature of excuses given by a failed student.

It was quite perplexing to note that he went the extra mile to remind the developed countries – in pursuing their fiscal and monetary policies – that they should take into account the repercussions on emerging economies.

What about India’s own domestic policy failings that had led to the current situation? ask experts from the international policy community.

This is even as they took comfort from the Prime Minister’s reassurance to the international community on his commitment to reforms and restraint from capital controls.

One area where policymakers have failed in recent years, is their inability in continuing to attract long-term capital.

India has been relying on short-term capital flows to fund its deficits.

After sleeping on the wheel for nearly four years, the UPA Government is now, in the last year of its term, pushing for several reforms that may not be fiscally prudent.

The Food Security Bill has political engineering all over it, say economy watchers. The Food Security Bill is another way of distorting prices, mis-allocating resources and adding to the fiscal burden in the longer term, says Peter Drysdale, a Professor of Economics at Australian National University.

“India’s progress through reforms has been impressive in the last two decades. But this (Food Security Bill) sends a wrong signal to the reform process.

“This and recent hardening of approach to FDI signals that a caution is needed about India’s deep commitment to the reform process.”

Lack of confidence in policy commitment is the main reason for the short-term shock now experienced by India. Any wise Government should recognise this, says Drysdale.

Fiscal discipline, commitment to openness on capital and commitment to leaving the exchange rate do its proper job are the need of the hour.

It’s not clear that the latter commitment is being taken seriously. Defending the currency may not be a right approach or a long-term solution.

Top bankers hail work of outgoing RBI Governor D.Subbarao

RBI Governor D Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

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Mumbai, Sept 2:  

Top bankers have hailed the contributions of the outgoing Reserve Bank Governor Duvuuri Subbarao saying he did his best during a tenure that was marked by difficult times for the economy.

“I think the Governor’s (five year) term has been in one of the most difficult environments globally and domestically.

“If you look at the world and our country today, there is so much change that you have to be at your feet and I can’t imagine anybody else doing a better job (than Subbarao),” Axis Bank Managing Director and Chief Executive Shikha Sharma said.

Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

Within a fortnight of him assuming office, global investment bank Lehman Brothers filed for bankruptcy and the hit pulled the global banking system down to an unprecedented credit crisis which eventually led to the worst recession since the Great Depression.

This was followed by a difficult period which saw RBI working in close coordination with the government and other financial sector regulators, as also other central banks, to ring-fence the economy.

While the fiscal and monetary stimuli ensured that the economy did not fall off cliff, this soon gave way to a spike in inflation. This saw rise in policy rates from October 2010 for a year or so even as growth started coming down.

As Subbarao’s term moved close to ending, worries over slowing growth and stubborn inflation complicated the matter for the central bank. His problems got compounded with the fall of the rupee beginning May-end. It declined to a low of 68.85 intra-day to the dollar early last week.

“I’ve the highest respect for him. He has been through difficult times and let’s put it this way: in hindsight, it’s very easy to judge anybody...I do believe he did a great job,” Aditya Puri, who heads the second largest private lender HDFC Bank, said.

“One thing that has not been fully talked about during his tenure is that he has reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant,” said Pratip Chaudhuri, the chairman of the country’s largest bank State Bank of India.

Chaudhuri, who favoured doing away with CRR, added that its reduction was one of the reasons for the economic buoyancy during early part of Subbarao’s stint.

“To some extent, the buoyancy which we saw in the economy in the previous two years, could be attributed to that,” Chaudhuri said