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India's Muddled Strategic Policy
Pak will do what it has done
for ages, time India
straightened out the mess
Repeated terror attacks from Pakistan
without any "closure" or "justice" mean that
Indian public opinion is perennially
suspicious of the government's "engage
Pakistan at all costs" policy.
Fearing nuclear war, India limits response
to Pakation
India needs to think fast on how to defend
its Afghan policy
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The RBI and the country need somebody who will bring in a
fresh approach.
Policy inaction has caused a loss of
investor confidence: Vallabh Bhanshali,
Enam Securities
READ MORE ON Vallabh Bhanshali | Rupee | reserve bank of india | Raghuram Rajan | Mr Raghuram Rajan | Food
Security Bill | fiscal deficit
In an interview with ET Now, Vallabh
Bhanshali, Chairman, Enam Securities Pvt
Ltd, shares his views on Raghuram Rajan,
government's policy inaction and the rupee.
Excerpts:
ET Now: As the new Governor of
Reserve Bank of India, what dimension
do you think Mr Raghuram Rajan will
bring about to India's monetary policy,
going forward?
Vallabh Bhanshali: We should heartily
welcome Mr Rajan to the RBI, owing to
three unique qualities that he brings along.
First, he has been a global authority on
economics, particularly financial
economics. Secondly, he is very young. Thirdly, throughout his career, he has displayed
confidence and conviction about his thoughts and views, which are based on deep
study. The RBI and the country need somebody like him who will bring in a fresh
approach. One thing which has really gone wrong is credibility and confidence.
Economy is about confidence. I hope that he is able to restore that to some extent.
ET Now: Do you think Mr Raghuram Rajan can fix and avoid the crisis that is
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Vallabh Bhanshali: The crisis did not build in one day and neither will the confidence.
However, you have to start moving in a positive direction by being consistent and
practical. The flip-flop or a certain amount of doggedness on policy created a big
confusion. Nobody knows the reality, but the perceived gap between the RBI and the
government has expanded to some extent with Dr. Rajan's arrival.
ET Now: There is no quick fix to get growth back and control CAD. How soon do
you think he will be able to turn things around?
Vallabh Bhanshali: I met him many years ago. I have heard him extensively and read
his books. He is somebody who will speak his mind, who will create a bond and a
rapport with the markets by being transparent about how things are, how our policy will
work and it makes a big difference. As a financial markets person, I can tell you the
amount of future we discount everyday is not funny. The moment we have confidence
about the future or its direction, we start doing things with confidence. I think Dr. Rajan
understands that and this is what he will bring to bear.
ET Now: Do you think that the country needs a hawkish or a dovish government
right now?
Vallabh Bhanshali: We need a practical governor - someone who is committed.
ET Now: Do you think Mr Rajan will have to make a cruel choice between growth
and stabilising rupee?
Vallabh Bhanshali: The policy announcements and initial efforts in the last quarter of
2012 gave us hope and in the budget, the Finance Minister was able to present a
curtailed fiscal deficit. That five-six-month period definitely created hopes. But the
inability of the government to convert policy intent into policy action, and on top of it, to
let lose things like the food security bill created this utter lack of confidence on all fronts.
ET Now: In the last 15 days, our currency has moved independently of emerging
markets. What explains this deep crash in the currency?
Vallabh Bhanshali: The rupee is floated to a certain extent and our current predicament
is well known - we have a current account deficit, we are energy deficient, dependent on
imports, a certain amount of liabilities are up for maturity in the short period. Rupee will
settle and the government is making a sincere effort. I do not believe that the rupee is in
a free fall.
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Leaving out the few officials like Finance Secretary, RBI guvs and a few advisors, most of
the Indian government is full of bumbling idiots. The ministers are half-literate with usually
no achievement of their own in legitimate business, finance or technology. Bureaucrats
having worked in a system based in seniority rather than merit and achievement, soon lose
their intellectual edge and inclination to work. A government of bumbling fools coupled with
corruption can inspire nobody's confidence. When Indians don't trust their own government
then how will foreign investors do so. One Chidambaram cannot compensate for the lack
of merit in Pranabs, Moilies, Georges, Sriprakash Jaiswal, Shinde etc.. Hopefully if there is
a change of government and Modi is able to surround himself with persons of merit, we will
see some change and the flight of capital will reverse.
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