Amid bloodbath in stock and currency markets, Reserve Bank of India head Raghuram Rajan on Monday said the country has strong macroeconomic fundamentals and sufficient forex reserves to contain volatility.
“I just want to indicate that we have plenty of reserves which was USD 355 billion [at the last count], plus USD 25 billion that exist because some of our forward sales. We have got USD 380 billion to play with,” Mr. Rajan told a banking summit on a day when the rupee plunged below 66.60 and the market tanked 4 per cent, its worst single-day fall in seven years.
“I wish to reassure the markets that our macroeconomic factors are under control as the economy is in much better position relative to many other economies,” Mr. Rajan said.
Hinting at a rate cut given the low inflation, record low crude and other commodity prices, Mr. Rajan said, “We will strive to give you the lowest interest rates that is consistent with our effort at bringing inflation under control. We are looking at incoming data ever since the last policy to see how things fare out.”
Quoting from RBI’s August 4 policy document, he reiterated the bank’s resolve to keep inflation under control and help boost growth with a low interest rate regime.
To a question on the bloodbath in the market and whether he expects the free fall in the U.S. and the Chinese markets to continue, Mr. Rajan said, “We have to absorb this volatility... but as far as our economic fundamentals go, they are good and they will re-ascertain themselves eventually after certain amount of turmoil. And when they do that reassessment they [foreign investors] will see that India is a good place to be. I feel fairly confident that the turmoil will settle down and at that point we will be a good investment destination again."
