RBI governor expects crude oil prices to ease further and help remove remaining restrictions on gold imports
Even as the benchmark Sensex dropped 800 points over the last eight trading sessions, Reserve Bank of India (RBI) governor Raghuram Rajan offered soothing comments that should cheer the markets. He sees investments to flow into debt and equity from gold amid falling inflation.
"I am also hopeful that as inflation comes down and fixed income securities become more attractive people would turn to investing into deposits, bonds or even equities as opposed to substantial use of gold as investments," Rajan said.
RBI is not unduly worried about the recent spurt in the current account deficit as oil prices are likely to ease further, he said, adding falling crude oil might also help remove remaining restrictions on gold imports. "Current account deficit has widened but it is still comfortable. But we will be watching the direction carefully. It would be hard to maintain the kind of restrictions (on gold imports) that we had for a too long period. At some point we have to start taking off the restrictions. And at a time when oil prices are falling and give us some cushion on current account front, perhaps it would be the time to see if we take off the restrictions. My sense is that oil prices will give us some cushion going forward. But how long we can rely on that is a matter of some uncertainty," Rajan told reporters after the meeting of RBI's central board in Kolkata.
India's current account deficit widened to 2.1% of gross domestic product in the July-September quarter, higher than the previous quarter and year-ago period. "There are risks to current account but at this point I wouldn't say we are apprehensive," the governor said on Thursday.
The government of India this year has eased some of the restrictions on gold imports it imposed in 2013, when a widening current account trade deficit had sparked off the worst currency turmoil since the 1991 balance of payment crisis.
Rajan also said the central bank is in discussions with the government about reviewing priority sector lending norms for foreign banks operating in India. "The foreign banks expressed to us some apprehensions about the obligations if they move into wholly owned subsidiaries. What we have to do is tell them the full range of responsibilities they would have. Their primary concern is priority sector, whether they would be able to achieve the agriculture lending norms for example. We are in the process, at the request of the government, of reviewing the priority sector norms," he said.
The board meeting on Thursday discussed domestic as well as global economic scenario, Rajan said.
When asked about the RBI stand on the spectre of global deflation, a factor that spooked several markets on Thursday, deputy governor Urjit Patel said the regulator sees positive impact of the global slump in commodity prices primarily because the country is a large importer of oil.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}