Indian Economy News & Discussion - Aug 26 2015

disha · Post by **disha** » 16 Jun 2016 09:49

^^ IMD did not get the 2015 forecast wrong. In fact it got it perfectly right. Please check the thread on the IMD.

Also IMD Monsoon forecast is an overall forecast. Like Sensex will touch X points by Y days looking at Z trends. However individual stocks and several of them will show initial decline by say 'x' over 'y' days and that is not a 'z' or 'Z' trend.

Look at the green lines against the LTA red-dotted lines: http://www.imd.gov.in/pages/monsoon_main.php

Further discussions on IMD and our penchant of dissing our own institutions should be done in the IMD thread. And BTW, skymet (the private guys) just regurgitates IMD with some of its analysis layered. They got it wrong in 2015.

kittoo · Post by **kittoo** » 16 Jun 2016 10:19

disha wrote:^^ IMD did not get the 2015 forecast wrong. In fact it got it perfectly right. Please check the thread on the IMD.

Also IMD Monsoon forecast is an overall forecast. Like Sensex will touch X points by Y days looking at Z trends. However individual stocks and several of them will show initial decline by say 'x' over 'y' days and that is not a 'z' or 'Z' trend.

Look at the green lines against the LTA red-dotted lines: http://www.imd.gov.in/pages/monsoon_main.php

Further discussions on IMD and our penchant of dissing our own institutions should be done in the IMD thread. And BTW, skymet (the private guys) just regurgitates IMD with some of its analysis layered. They got it wrong in 2015.

Yeah I understand that its the total forecast. I am just talking about them getting the dates of delay wrong again and again. I find it hard to see how how Monsoon would be in excess when its in huge deficit right now. I hope I am wrong.
To me Skymet also seems just as wrong as anyone else. Never thought they were anything special.
Also, there is an IMD thread? Searched via google didnt find anything.

Suraj · Post by **Suraj** » 16 Jun 2016 11:37

Monsoon forecasts are not day to day forecasts. It's a forecast of rainfall across an entire 3 month period. Please take further discussions of monsoon tracking to the meteorological science thread in this forum, though.

Singha · Post by **Singha** » 16 Jun 2016 13:28

local forecasts that are accurate in khanish style need a network of Doppler radars that can study the local storm cells and clouds in depth. due to lack of funds, I do not think we have more than a token few.

khan certainly has 100s.

there is a tender out to buy a business jet and mod it for weather study. they should just have gone COTS for the model the US uses its a C130 that can fly in and out of storms.

our west coast has a grand total of 4 dopplers
http://www.imd.gov.in/pages/obs_network.php?id=16

Singha · Post by **Singha** » 16 Jun 2016 13:29

^^ vast swathes of the interior has nothing. the BoB coast has more only due to cyclonic threat there.

given the money and mandate DRDO should be easily able to develop 100s of desi doppler radars and software for forecasting with IMO giving the domain data bank.

Prem · Post by **Prem** » 16 Jun 2016 23:52

Piyush Joshi ‏@AcmatixJoshi 1h1 hour ago
#RBI
Arundhati Bhattacharya will be the first #woman to be The Governor of RBI

Kakkaji · Post by **Kakkaji** » 17 Jun 2016 00:24

Abolish income tax to push growth: Subramanian Swamy

MUMBAI: BJP leader Subramanian Swamy today pitched for abolition of Income Tax to increase savings rate and help economic growth, and also suggested nationalisation of funds stashed in tax havens to retrieve the black money.

"If I am in the Government, I will do it within one week, if I am not in Government, I will do it (remove income tax) within three years. The only way to encourage people to save more today is by abolishing the income tax completely," Swamy said.

Swamy said here the national savings rate has dipped to 33 per cent and needs to be pushed up to at least 40 per cent.

Increase in the savings rate will provide resources for growth and the Rs 2 trillion which will have to be foregone (if the income tax is abolished) will get more than compensated, Swamy said, stressing that the country needs to push the growth up to 10 per cent per annum for at least a decade for eradicating poverty and unemployment.

The leader claimed that Rs 120 trillion or 60 times the revenues from tax collection is stashed in tax havens abroad which needs to be brought back

Citing his conversation with Modi, he said the Prime Minister has "preferred" adoption of a UN-approved method of recovering the black money by nationalisation of such funds.

"If any country passes a law...that the citizens of their country holding accounts in the banks of these 70 countries (practising secret banking), their bank account is hereby nationalised," he said.

Stating that countries like Egypt, the Philippines and Libya have used this method, Swamy said Modi has asked him to prepare a note on the same.

"I am hoping that the note that I will be giving to the PM in a few days will translate itself into a law, into a legislation and then we can hope we will get all these countries to give the money," he said.

"Why didn't we do this all this while? Because Jaitley is a lawyer and he was little sensitive to the rights of those who have accounts there. But now the PM says this is an important issue and we have to do something about it," he said.

Gurus, please comment.

Hitesh · Post by **Hitesh** » 17 Jun 2016 02:34

We need to encourage more revenue. I would support abolishing income tax in exchange for an uniform GST tax code. No talk of progressive taxes please as I find them to be utterly rubbish.

Suraj · Post by **Suraj** » 17 Jun 2016 03:24

Kakkaji wrote:please comment.

A maverick making maverick comments. Too many issues to deal with to get to the proclaimed utopia. PMO's emphasis is on widening the tax base, not radical overhauls that suck up administrative and political energy:
Double taxpayer base to 100 mn, PM to taxmen

Prime Minister Narendra Modi pitched for nearly doubling of tax base to 10 crore assesses while addressing tax officers in the first ever Rajasva Gyan Sangam that kick-started on Thursday.

Modi outlined a five-point charter for tax administrators – RAPID, which stands for Revenue, Accountability, Probity, Information and Digitisation to reform the taxation system in the country.

GoI cracks whip on price rise

MEASURES TAKEN TO ARREST INFLATION
Sebi suspends futures trading in chana
Centre imposes 20% export duty on sugar
25% export duty on wheat extended
IB and Department of Revenue Intelligence to keep an eye on cartelisation
Senior officials to scout for opportunities to grow pulses in Mozambique for Indian consumers
States told to crackdown on those who are selling chana and urad at more than the prescribed price
Shipping ministry told to expand vigil at ports

India's March quarter CAD narrows to 0.1% of GDP

India's current account deficit (CAD) declined sharply to $0.3 billion or 0.1 per cent of its gross domestic product (GDP) in the fourth quarter ended March for financial year 2015-16, against $7.1 billion (1.3 per cent of GDP), in the third quarter ended December 2015, on account of a lower trade gap. The CAD was $0.7 billion (0.1 per cent of the GDP) in the quarter ended March 2015 for FY15.

For the entire FY16, CAD stood at $22.1 billion (1.1 per cent of the GDP) against $26.8 billion (1.8 per cent of GDP) for FY15, according to Reserve Bank of India data. Stating that CAD at 1.1 per cent of GDP was a "robust macro economic indicator", Economic Affairs Secretary Shaktikanta Das said efforts would continue on reforms.

Aditi Nayar, senior economist, ICRA, said the CAD for FY16 was broadly in line with expectations. A fall in the services trade surplus and lower remittances eroded a significant portion of the savings arising from the narrowing of the merchandise trade deficit.

The trade deficit in the fourth quarter of FY16 stood at $24.8 billion, compared with $31.6 billion in Q4 of FY15. The deficit was $130.1 billion for FY16, while for FY15 it stood at $144.9 billion.

vina · Post by **vina** » 17 Jun 2016 07:06

Brilliant . Tamil Nadu led by Amma, is now looking to trade support for GST in getting help in getting the Nokia plant in Sriperumbudur reopened under fox conn to make cell phones and putting pressure on the central govt to settle /ease the tax cases against Nokia so that the asset can be put to better use.

This reminds me of the time when Standard Motors in Chennai went belly up and Jayalalitha went and got Ford and Hyundai to set up their factory in Madras and the rest as far as auto plants go for TN is history. The Nokia plant getting started again sounds like Chennai is going to be in electronics hardware manufacturing what it has become in Auto, thanks again to Amma.

While TN goes about ruthlessly safeguarding it's interests and the larger interest by cutting deals with a perfect sense of timing, KA and KL are in their usual comatose state and with the newly aggressive Andhra under Chandra Babu, I fear what will happen to KA. TN will fight tooth and nail to compete with Andhra and leave no stone unturned, while KA will simply roll over and die.

kvraghav · Post by **kvraghav** » 17 Jun 2016 07:45

Income tax should not be abolished since it wont increase the saving. People will just invest everything extra in real estate which is non productive. Until people invest in securities or deposits more which help in creating meaningful assets in the nation, I don't think govt should do anything to encourage savings.

Singha · Post by **Singha** » 17 Jun 2016 09:10

Andhra is already leveraging the closeness of Sri city across the border to make use of chennai ecosystem and logistics.

KA - sigh.... let it be saar. let us make more money off land permits and layouts.

member_27845 · Post by **member_27845** » 17 Jun 2016 09:48

Total abolishment of income tax might be a tad too radical and also without merit

Just a few supporting arguments for total abolishment in the link below ( but I am not for it )
http://www.firstpost.com/business/econo ... 24061.html

But a rationalisation to more reasonable levels might be a good idea

With the cost of living in India in mind , the foll could be a good step :

0-5 lacs pa : 0% IT
5-12 lacs pa : 5%
12-24 lacs pa : 10%
Above 24 lacs pa : 17%

The first advantage is the immense feel good factor it will engender - some sense of acche din among the suffering middle class

Further , people will not have to resort to illegal means to evade taxes

A reasonable rate will be incentive to pay the due amount

The savings rate would jump and with declining FD rates and the sluggish real estate markets , people would gravitate to equities and even start businesses

There is a pervading feeling among many that the taxes we pay is a waste , the government does nothing and a lot of it goes to politicians and bureaucrats as bribes

A reduced rate of IT would assuage many who do pay their taxes

The best remedy is of course elimination of corruption and a government that uses the receipts wisely

sankum · Post by **sankum** » 17 Jun 2016 10:00

Their should be no abolishment of IT but inheritance tax should be levied like in developed countries @35% above transfer of Rs 100 Cr to dependents for India to be a welfare state and lot of ill gotton properties of our Netas/citizens will be taxed.

NRao · Post by **NRao** » 18 Jun 2016 04:09

Worth a watch.

This is how it is done.

sivab · Post by **sivab** » 18 Jun 2016 17:51

Good riddance. GOI gave him graceful exit.

https://m.rbi.org.in/Scripts/BS_PressRe ... prid=37259

While I was open to seeing these developments through, on due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as Governor ends on September 4, 2016.

Yagnasri · Post by **Yagnasri** » 19 Jun 2016 15:05

Expect some artificial shocks on Monday in stock markets as speculators play a short term game. A lot of sound bites will be there next week or so on R3 exits.

nawabs · Post by **nawabs** » 19 Jun 2016 20:29

Corporate Litigation Landscape of India Overhauled

http://www.nishithdesai.com/information ... tml/1.html

chanakyaa · Post by **chanakyaa** » 20 Jun 2016 03:18

** self-delete **
Oops!! Such a terrible mistake...waiting to hear a knock on the door anytime to be sent to BRF kalapani

Kashi · Post by **Kashi** » 20 Jun 2016 04:28

^^ Seriously? Linking an article by Mihir Sharma?

chetak · Post by **chetak** » 20 Jun 2016 09:39

I think that the R3 groupies and their international fanboys have overplayed their hand.

There is not even the teeniest of a bump in the sensex after the news of his exit.

I wonder what is the next project of the irudalis??

and poor soha ali khan and her solitary tweet about R3's exit. Lots of egg on her face and that too before iftar.

Suraj · Post by **Suraj** » 20 Jun 2016 10:22

Mod note
All the recent car related posts have been moved to the Indian Autos Thread. Please continue your discussion on the topic there.

Back on topic, markets are doing fine, despite sensationalist talk about a crash due to Rajan's exit. Policymaking is also unaffected:
Banks will press ahead with clean-up despite Rajan's exit

India's move to clean up the books of its banks saddled with $120 billion of sour loans will be largely unaffected by the decision of central bank chief Raghuram Rajan to step down, say bankers and government officials.

As banks struggle with record levels of distressed assets, Rajan had set an ambitious March 2017 deadline for them to fully reveal the problem loans and make adequate provisions.

An unprecedented asset quality review of banks ordered by the central bank led to reported bad loans surging more than 70% in the six months to March.

Rajan's decision to bow out in September has, however, raised questions on the fate of a clean-up seen as crucial to reviving new lending to support a nascent recovery in Asia's third-largest economy.

Bankers and government officials told Reuters Rajan's successor may be less aggressive in fighting bad loans, but the general direction will remain the same.

"Having worked with eight (RBI) Governors, I have not seen any new incumbent turn an earlier policy, particularly relating to banks, on its head," said G. Padmanabhan, a former executive director at the RBI who currently chairs the board of third-biggest state-run lender, Bank of India.

"Second, and more important, this was not a one man decision and had the support of government as well," he said, although there could be some tweaks as the timeline was "aggressive" and banks' capital needs had to be factored in.

Piyush Goyal says he will not cut govt stake in power PSUs below 51%

Supporting Finance Ministry's disinvestment plan for public sector undertakings, Union Minister Piyush Goyal has said his ministry will not reduce the government's stake in power sector PSUs below 51%.

"Finance Minister can do whatever (as much disinvestment) he wants to do. We will support him. But we will not go for (reducing government stake) below 51%. That is what we had announced for CoaI India and our other PSUs," Power, Coal, New and Renewable Energy Minister Goyal told PTI.

Elaborating further he said: "Management and control of the PSUs should remain with the government. Last year divestment in PFC and REC was done. If they want then we are ready for another round."

The government has set a disinvestment target of Rs 56,500 crore for the fiscal. Of this, Rs 36,000 crore is to come from minority stake sale in PSUs and Rs 20,500 crore from strategic sale.

Good monsoon to push GDP growth to 8%

Economic Affairs Secretary Shaktikanta Das expressed hope that the likely passage of Goods and Services Tax (GST) bill in Parliament would further add to the business sentiment, fuelling growth.

"We will certainly exceed 7.6 per cent growth. If the monsoon is good which we expect it will be because of the forecast and once the GST is passed, we can expect our GDP to touch 8 per cent in the current fiscal," he told PTI in an interview.

In 2015-16, the country's economy grew 7.6 per cent and the Economic Survey in February had projected a growth rate of 7-7.75 per cent for the current fiscal while RBI had forecast 7.6 per cent for the current fiscal.

He further said although the GST is likely to be rolled out from April 2017, its passage would significantly help in boosting sentiment and generating economic activity.

"The moment GST is passed, the business environment will improve. This will give a huge boost to business sentiment and economy is all about real factors and sentiments.

TSJones · Post by **TSJones** » 20 Jun 2016 12:15

http://finance.yahoo.com/news/el-erian- ... 43708.html

El-Erian: Raghuram Rajan’s departure is bad news, and not just for India

Saturday’s announcement that Raghuram Rajan would not serve a second term as governor of the Reserve Bank of India, the country’s central bank, is bad news – and not just for an India that could well be on the verge of finally unleashing more fully its huge growth and development potential. It is also unfortunate for a global central banking community that is facing its own set of increasing challenges, both political and related to the excessive policy burdens that key central banks have been forced to carry.

Rajan brought to the RBI job an admirable mix of talent, academic rigor and courage – as well as profound experience from his time at the International Monetary Fund. Under his leadership, the central bank restored India’s macroeconomic stability, a critical condition for high inclusive growth. Progress was also made in reforming and strengthening the financial system with a view to improving its soundness, efficiency and contributions to growth and development.

With such visible and determined progress, Rajan helped enhance the credibility of the RBI. This served as yet another catalyst for higher inflows of foreign direct investment, particularly given the importance that investors place on institutional soundness.

Inevitably, Rajan’s leadership of the RBI did not please every politician, including some particularly vocal ones who felt that insufficient attention was being given to specific credit facilities. With Narendra Modi, India’s reformist Prime Minister remaining rather quiet in the resulting controversy, Rajan informed his RBI colleagues on Saturday that he would not be serving a second term when his current one expire in September.

Rajan’s departure serves as yet another example of messy and noisy politics getting the better of good economics. Depending on who is named as his successor, the losses could well extend beyond an India that now risks slipping on what has been an impressive surge in an important area of policymaking.
Rajan is also a highly respected member of the global central banking community. His contributions have proven particularly important when it comes to thinking about the international spillover effects from a period of prolonged monetary policy experimentation by Europe, Japan and the United States.

Rajan will be missed, and by many. And while he expressed a desire in his Saturday notification to return to academia, the world would surely benefit from him eventually assuming a top position at an influential multilateral economic institutions … be it the BIS (Bank for International Settlement), the IMF (International Monetary Fund) or the World Bank.

Mohamed A. El-Erian is the chief economic advisor to Allianz, the corporate parent of PIMCO where he served as CEO and co-CIO (2007-2014). He is Chair of President Obama’s Global Development Council and the author of two New York Times Best Sellers: the 2008 “When Markets Collide” and this year’s “The Only Game in Town.”

Arjun · Post by **Arjun** » 20 Jun 2016 12:25

Raghuram Rajan had absolutely zilch to do with increased FDI...which was a result of more proactive policies and improved growth outlook that the government has been working on.

Rajan can perhaps be credited for increased debt inflows but certainly not the FDI.

Austin · Post by **Austin** » 20 Jun 2016 12:27

Counter Point to Rajans Departure , Looks like BJP was unhappy with him h

Rajan Appeared Uncaring About India's Aspirations

It is rather ironic that for a highly rated engineer-turned-economist, the twilight of his career should have been triggered not by technical disagreements with his employer, but by a breakdown of cultural communion.

Dr Subramanian Swamy may or may not have been right in suggesting that the outgoing Reserve Bank of India's (RBI) Governor did not have a "sufficiently Indian" mindset. But there is no doubt that Raghuram Rajan approached his job in India technically, without taking into account the country's cultural underpinnings and aspirational urges.

Even if Rajan did not end up as the proverbial fall guy, he lent himself to becoming a stick to beat economic woes with; "he damaged the economy" it was bluntly said in government circles. The perception was that despite Prime Minister Modi's untiring efforts and India's economic parameters being very sound, India was not moving fast enough.

People have been asking with increasing frequency as to why, despite highly favourable oil prices, rising FDI and political stability, the economy is merely jogging along instead of racing ahead. A growth rate of 7.6 per cent in current global conditions, particularly China's slowdown, is obviously impressive. But by describing India as "Andhon mein kana Raja" (the one-eyed is deemed king in a gathering of the blind), Rajan may have run down his own achievements. He also demonstrated a less-than-patriotic enthusiasm to play cheerleader, expected to tom-tom his government's achievements, rather than be economical with his praise.

As a UPA appointee who took office in September 2013, Rajan's instincts were decidedly conservative. He was inducted into a key policy-making position by Manmohan Singh at a time when the then government was battling corruption charges on several fronts. Consequently, those were the heydays of "policy paralysis". The UPA government in its last years was content with conducting a holding operation rather than experimenting with new schemes or economic boosters. In the aftermath of the 2008 global depression, Rajan may have rightly pitched for a slow and steady approach, although that was not the best prescription to go into election mode.

From all accounts, public mood in India in 2013-14 was one of anger and disgust. Corruption scandals, especially the humungous spectrum scandal followed by the even more gigantic Coalgate scam, accompanied by prolonged economic stagnation, was testing popular patience. At that point, Modi's robust campaign playing to aspirational chords of the youth and the promise of "acchhe din" aroused astronomical hopes of an economic turnaround. Modi wove magic assuring the launch of an Indian Century.

Thus when the NDA Government came into power in May 2014, it was riding the crest of a wave of optimism and faith in the instant transformation of the economy. Perhaps Modi made the mistake of retaining Rajan at the helm of economic policy-making, assuming he would read the political signals and change appropriately. With a trusted confidant, Arun Jaitley, as Finance Minister, Modi may not have been wrong in his assumption.

The economy, in any case, was beginning to look up, although inflation was still not under control. Rajan decided to prioritise pulling the leash on inflation over rapid growth, as skyrocketing prices of essential commodities was a key factor in the UPA's dramatic downfall. His tight money policy indeed helped to keep inflation in check.

A basic economic law is that tight money policy curbs price rise but simultaneously restricts growth. Investors are loath to put their money where their mouth is, expecting the government to shell out funds for public projects. On its part, the government was unwilling to go beyond budgeted sums as Jaitley's priority was to stay within the fiscal deficit target, something he commendably achieved.

Was Rajan too dogged in refusing to cut interest rates? Arguably, a significant cut would have spurred more withdrawals from banks and FIs, thus investment in industry could have seen a steady rise. The economic stagnation encountered during 2012-14 was in no small measure caused by two successive monsoon failures. All these factors appear to have made Rajan even more conservative than his own natural instincts. Although he never spelt this out categorically, it seemed he was unwilling to touch interest rates till the onset of the monsoon, hoping like everyone else that the rains in 2016 would be bountiful and therefore give a spurt to rural demand which had been sluggish for long.

In theory, the RBI chief was not wrong. He had often emphasised that an increase in inflation could wipe out all the gains made by the economy in a tizzy. But this is where his conservatism clashed with the political and cultural demands for rapid growth. Rajan failed to internalise that the middle class was straining at the leash and wanted to see India gallop into double digit growth. But the visible indices of galloping growth, such as a spurt in sectors like real estate, simply refused to materialise. Overawed by massive amounts of bad debt and mounting NPAs, public sector banks were unwilling to open their vaults to fund dicey projects, especially real estate, where oversupply had taken a toll of viability. Rajan's emphasis on increasing savings fell on deaf ears because the middle class was by now impatient to spend, not save.

But the bigger cultural problem Rajan faced was his natural temptation to talk policy issues openly. Although not necessarily a bad thing, the RBI chief got embroiled in unnecessary controversy by his remarks on policy issues like interest rate cuts. He got riled by comments against him made by persons like Dr Swamy who took a high nationalist ground and made Rajan look like a person not fully wedded to the country's interests.

Never before has India had an RBI chief who has been in the limelight in this manner. Over the last few weeks l, speculation over his continuation has been similar to that of, say, MS Dhoni continuing as India's cricket captain. Evidently, Rajan failed to make friends in important places; his critics ran away scoring goals from afar which he failed to deflect.

Understandably, it is difficult for a professional to work effectively in this environment. Although the RBI Governor is not required to bow to populist pressure, it is necessary for him to understand that pressure and why it is surging. India's urge for quick and sustainable economic growth and people's expectations of the Modi government are factors any policy maker had to take into account.

Rajan appeared too distant and uncaring about India's aspirations. That was his unmaking.

(Dr. Chandan Mitra is a journalist, currently Editor of The Pioneer Group of Publications. He is also BJP MP of the Rajya Sabha.)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

chetak · Post by **chetak** » 20 Jun 2016 12:33

He cut his own throat by poking his nose in areas that no sober RBI governor wouldn't be seen dead in.

was he simply reckless or was it something more ominous?? Only Rajan can tell

RBI chief Rajan felt undermined in weeks before quitting

RBI chief Rajan felt undermined in weeks before quitting

Jun 20, 2016 |

According to friends and colleagues, Rajan had for weeks faced intense pressure from Subramanian Swamy.

Reserve Bank of India (RBI) Governor Raghuram Rajan's abrupt decision to quit came as he increasingly felt he lacked support from his political bosses Finance Minister Arun Jaitley and Prime Minister Narendra Modi, according to friends and colleagues.

A newspaper report a week ago that a selection panel would consider a field of candidates rather than directly offer the former IMF chief economist an extension to his three-year term, effectively forcing him to reapply for his own job, may have been the final straw, according to these people and a finance ministry source.
"He felt it would belittle the position of the RBI governor if he had to appear before the committee," said one senior commercial banker who knows Rajan personally but had not spoken to him since his decision. "It would reveal a lack of government support. Rather than have two more years of constant quibbling, he decided to go."
The darling of international investors was also upset that Jaitley had not backed him more strongly after criticism from Hindu nationalists of both his policies and his perceived lack of "Indian-ness", the sources said. Rajan joked when he took over the top job at the Reserve Bank of India in September 2013 that he wasn't expecting to win any votes or Facebook 'likes' in the position.

But the hostility he had faced of late from elements of Modi's ruling party was evidently greater than he had counted on, the sources said. When Rajan decided to leave, he did so without warning and on his own terms: in a sign of growing tensions he did not inform top members of the government before releasing an open letter to staff on Saturday, a move that took investors and the government by surprise.

NO CONTACT

In his letter, Rajan said he had been open to seeing through changes he championed such as the creation of a monetary policy committee to set interest rates and a clean-up of the banking sector. But he added: "On due reflection, and after consultation with the government, I want to share with you that I will be returning to academia when my term as governor ends on Sept. 4, 2016."
Rajan was not available for comment but will face questions on the motives for his abrupt withdrawal at a speaking engagement on Monday afternoon in Mumbai. Less than two weeks ago, he laughed off speculation about his future after an RBI policy meeting, saying: "You will know when there is news." Five sources familiar with the matter said Rajan had not contacted Modi's office directly. Nor was a meeting or discussion between the two planned, said one senior official.

Modi has not commented, tweeting instead on Sunday about the forthcoming World Yoga Day. Jaitley had been in his office on Saturday and gave no indication of concern about Rajan's future, leaving for home before the news broke, an aide said.
The finance minister tweeted after a delay of more than two hours that he respected Rajan's decision. It was unclear whether Rajan had briefed senior staff at the Reserve Bank of India since his bombshell decision.

"I am surprised," said one person who has worked with Rajan and who spoke on condition of anonymity. "A week back he was sounding very much interested in serving a second term."

SAFFRON POSSE

Rajan had for weeks faced intense pressure from Subramanian Swamy, a politician in Modi's Bharatiya Janata Party (BJP) who, say sources familiar with the matter, was acting with the backing of the Hindu-nationalist umbrella group to which the BJP is affiliated, the Rashtriya Swayamsevak Sangh (RSS).

Swamy, a 76-year-old former Harvard economist with a record of aggressive anti-corruption litigation, wrote an open letter to Modi a month ago accusing Rajan of being "mentally not fully Indian" and calling on the prime minister to "terminate" him with immediate effect.

The broadside from Swamy came soon after he was handed a seat in India's upper house of parliament by the ruling party, creating the impression that he was acting on good authority. Challenged to respond to Swamy, Jaitley merely said that Rajan's candidacy should not be discussed publicly.

"As a colleague I could see he looked hurt," said one senior policymaker who works with Rajan. "You can question my efficiency, but if you question my loyalty to my job, then one would expect your employer to stand up and defend - and not stay silent."

Yet it was Rajan's own forays into politically sensitive territory that led the Hindu right to target him - in particular over a speech last October to students in Delhi in which he said that social tolerance was vital for a country's development.

"NO-GO ZONE"

The issue of "intolerance" has been a catalyst of controversy under Modi, driving to the heart of whether the overt message of development for all that he campaigned on to win the 2014 general election can hold, or whether a more divisive Hindu-first agenda will prevail under his party's rule.

Questions about where Modi stands on the issue date back to early in his term as chief minister of Gujarat, where more than 1,000 people, most of them minority Muslims, died in communal rioting in 2002. He was dogged for years by allegations that he either turned a blind eye to, or even encouraged, the attacks until a court-ordered probe found there was not enough evidence to prosecute him. Throughout, Modi has denied wrongdoing.

"It was Modi who protected him for the longest time but the defence wall collapsed when Rajan entered the no-go zone of politics," one senior RSS official told Reuters, speaking on condition of anonymity.

After he was appointed by the last Congress government, the 53-year-old Rajan took extended leave from his post as a finance professor at the University of Chicago's Booth School of Business. This would have lapsed had he not returned in time for the fall semester.

Friends also say his family had wanted him to return - his wife has remained teaching in Chicago. One senior official said Rajan had signalled his willingness to work until next March - the deadline he had set for completing a clean-up of bad debts in the banking sector. This had not been seen as workable, however, with a "natural" departure at the end of his term rather than an "unnatural" exit later viewed as a less bad option.

Nitesh · Post by **Nitesh** » 20 Jun 2016 15:11

http://economictimes.indiatimes.com/new ... 831262.cms

"Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI," an official statement from PMO said.

Key changes include allowing 100% FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India and permitting up to 100 per cent FDI in defence sector. The other sectors that have benefitted include the broadcasting, pharmaceuticals, civil aviation, single brand retail among others.

Yagnasri · Post by **Yagnasri** » 20 Jun 2016 15:30

i do not know if things like broadcasting shall be open.

ldev · Post by **ldev** » 20 Jun 2016 17:47

chetak wrote:He cut his own throat by poking his nose in areas that no sober RBI governor wouldn't be seen dead in.

was he simply reckless or was it something more ominous?? Only Rajan can tell

RBI chief Rajan felt undermined in weeks before quitting

When he took over in Sep 2013 the Rupee was tumbling and there was no confidence in the UPA mired as it was in corruption and unable to make any decisions. 3 years later, Modi has taken over front and center as the barometer for confidence in the Indian economy and hence Rajan appears to be dispensable. I think he hit real headwinds with his insistence on wanting transparency on non performing assets in the banking system although the ostensible reason given was his insistence on following a tight money policy. Two factors to watch over the next 6 months to 1 year are the Indian rupee and whether people like Mallya make a triumphant return to India with the NPA issue swept under the rug. If the rupee starts depreciating and Mallya returns then one can surmise it was a political decision.

Pronouncements he made strictly outside the monetary policy ambit may be acceptable by central bank chiefs in the West where Rajan made his name and his career but in India the RBI Governor is expected to be a bureaucrat who hews closely to his narrow sphere of work.

Patni · Post by **Patni** » 20 Jun 2016 17:54

Just attended Our Governor's speech, he delivered at TIFR as foundation day lecture. He focused it on inflation taming and transitioning india from high inflation economy to lower inflation one as long term RBI goal and how he has tried to institutionalise the same at RBI so that it continues after new governor comes in. He mentioned that PSU banks have more or less stopped lending to SME and midium businesses in last 2 years starting 2014!! and its mostly now been done by private sector banks! Sounds like ticking time bomb that was activated at start of modi sarkar!! Its clear now that it has resulted in shrinking of PSU bank landing pie in growing Indian economy and private banks are allowed to grow roots, not all bad if it sets up business competitiveness in PSU banks.

Overall he mentioned in long term he sees that indian inflation rate has to converge with rest of the worlds rate with 2% of margin, so with ROW inflation at 2% or so means he wants indian inflation to come close to 4% and stay there for long term. According to him that will also mean slow down in rupee depreciation rate from current close to 5 to 6% a year to close to 2% a year.

Patni · Post by **Patni** » 20 Jun 2016 18:04

In his speech he spent lot of time in defending his inflation focus and indirectly said swamy is inconsistent and that lowering policy rate to spurt up growth is not good for economy as it willl be only temporary and will cause inflation spiral and lead to hyperinflation. He said while RBI cant control food inflation at all, what they do is try to control other items of CPI to compensate for higher inflation in food. by tryng to lower inflation in other items of CPI to keep overall inflation lower even if food inflation is high.

Patni · Post by **Patni** » 20 Jun 2016 18:09

Link to report and complete speech text.

Rajan praises Modi govt for adopting CPI-based inflation targeting, MPC

vina · Post by **vina** » 20 Jun 2016 20:21

This govt has been absolutely disgraceful in dealing with Raghuram Rajan's exit. Sure, if they were not happy with him, they could have told him that they will not be offering a second term to him and they could have given him a dignified clean exit, like many other governors who had served only one term had earlier.

But no, they had to unleash the "attack dog" , Subramaniam Swamy and his outrageous insinuations and puerile ad hominems , along with slander and calumny. But no, the Govt had to do wink wink , nod nod like in other cases, including communal incidents where some party functionaries indulge in atrocious behavior and speech, while the govt maintains a studied silence.

Oh, well , and what are the names rolling around for Raghuram Rajan's replacement ? Many eminent ones, but along with them, some absolutely quixotic and cartoon like characters (ideologically affiliated with the RSS), who while quaint and entertaining in their buffoonish ways outside govt, will seriously and irreparably wreck this country's economy if allowed to run riot with their hare brained ideology driven ideas (much in the same way as the Indira Gandhi imposed lurch towards the hard left wrecked the economy until 1991).

On top of this, the govt rolls out "reforms" in FDI , chief among them being 100% FDI in airlines, and single brand retail relaxation in sourcing norms (leaving out the "cutting edge" technology whatever cool aid, a hang over of the RSS sloganeering of old of "Yes to Computer Chips, but no to Potato Chips"). Now consider Mallya, who went bankrupt precisely because, he couldnt sell Kingfisher and exit, because of the FDI restriction (Jet could pull along until the rules were amended to allow a sale to Etihad, as also Spicejet I think). There, that mulish stuck in the mud attitude of the govt bankrupted KF, allowed a huge NPA problem, all at the same time, continuing to feed the perpetually loss making Air India with a huge bailout of a whopping 30,000 crore (not counting accumulated losses) in a decade long plan!

And what of this single brand retail. Not one large retailer of consequence has set up here, and even Apple with all the relaxation, will probably manufacture nothing here if ever! Even Ikea and Apple are going to import from China and sell here. They might as well do it, no point in feeding he middle men and increasing costs for the customers. They do it anyway, so really no point in fattening the middlemen.

And oh, the Govt rolled out the Chief Economic Baboon in front of the TV cameras to make noises about economy and FDI and generally talk up things. As if he is going to carry any conviction at all with anyone with is empty blathering, especially so , when the newswire flash say "Govt issues clarifications on PF withdrawal", and the naked attempts at grabbing the savings of people who actually contribute cash (as opposed to the Govt Baboons, whose contributions are mere accounting entries , and not actual cash flows unlike the private guys) and dole out patronage with it and stiff the guys who actually put up the money by paying out a pittance. When the dominant impulse is a grab someone else's cash by any means, the best the Economic Baboons can do is to stay in the treetops. But no, the they have a huge self image as movers and shakers. Well, good luck to them when the global waves of adversity of a financial panic or shock hit them , and a fat lot of good their King Canute like ordering the waves back will do to this country. The Baboons of course will collect their pension benifts, which the luckless people of this country will be of course be paying with their blood and sweat as taxes.

Suraj · Post by **Suraj** » 20 Jun 2016 20:32

Rajan resigned on his own terms 3 months ahead of the end of his term. What more dignity does he need or deserve ? None. All other RBI heads whose term ended, ended more or less the same way.

When Rajan accepts a political appointment, he better get used to the idea that he'll get political responses to his actions. If thats too hard for him (or for you) to countenance, then he should stay in academia.

manjgu · Post by **manjgu** » 20 Jun 2016 20:42

the NDA govt didnt sack Rajan in 2014 when they came to power. they let him complete his term..what more by the way of dignity? do they nominate him for Bharat Ratan? no one is indispensable... be in Nehru or Indra gandhi or rajan. He is not the only competent economist in India.

Subramaniam swamy may be a attack dog..and India needs such ( watch) dogs. he has single handedly done more for India than Rajan can ever hope to do. more power to swamy.

Kakkaji · Post by **Kakkaji** » 20 Jun 2016 20:46

vinaji has conveniently forgotten to mention that the 'FDI Reforms' announced today also include opening up the Defence sector to 100% FDI.

Government announces sweeping reforms to FDI rules

NEW DELHI: India announced on Monday sweeping reforms to rules on foreign direct investment, opening up its defence and civil aviation sectors to complete outside ownership and clearing the way for Apple to open stores in the country.

The new reform measures also relax restrictions on inbound investments in pharmaceuticals and single-brand retail.

Defence contractors that have been reluctant to transfer technology to manufacture equipment in India would get the right to own local operations outright, with government approval, up from a cap of 49 percent previously.

In other changes, India allowed 100 percent FDI in civil aviation, following on from last week's launch of a new policy that lowered barriers to entry for airlines that want to fly international routes.

The government also allowed foreign companies to own up to 74 percent in 'brownfield' pharmaceuticals projects without prior government approval. India already allows 100 percent ownership of greenfield pharma businesses.

methinks vinaji's post above would have been even more vitriolic, had it not been an ex-Harvard Professor tambrahm who was responsible for the exit of another top-school professsor tambrahm.

The next chief of RBI better be a tambrahm.

(Mods please delete my comments above if inappropriate).

BTW, the Sensex closed up 241 points, Nifty up 68.30.

Yagnasri · Post by **Yagnasri** » 20 Jun 2016 20:55

While I agree with you on many mistakes GOI since 2014, I can not agree with many of your points Vina, sir. My opposition to R3 is well known and recorded here. From the start, I think he is not good in the long term interest of India. In respect of the dignified exit for him, GOI did not start this debate for his extension. MSM did, and it is quite possibly raised many eyebrows in ruling party and its supporters.

Subbu Swamy does not even spare Jetlee who I believe he calls as Shakuni, so it is not surprising if he attacked R3. As far as letting him lose on R3, no one can let him drop on anyone. He is a like that only, and we all know it. GOI has its agenda and not interested in media setting agenda. We all know how news items of manipulated time and again and how and who sets national agenda. GOI need not hear them. NM worked like that before and still working like that. While the media management required to be improved it can not be helped when you have a hostile media.

On FDI in Airlines Industry, it was promised by UPA many times, and they did not do it till KFA become bankrupt. In fact, rumour has it that UPA ensured that KFA fails. But that can not be put on present NDA. Mallya also never helped his case by doing all kinds of legal dances. How can NDA he responsible for this matter? In case of Air India, it is a mess because of the mistakes done over decades by GOI and ministers. Why to blame it alone and not say anything on the looting of it by ministers like Praful Patel etc.

I fail to see what great job R3 did for seeking extension in the first place. Yes, inflation moderated, but what about the jobs. With a huge number of young men and women entering job market year after year, there is no way we can have a peaceful society for long without massive job creation. What R3 did in this? Nothing.

Is RBI as regulator not accountable for NPA mess. What are their officials doing AFIs year after year in all PSU Banks? How come they have not found anything fishy at all? What is their policy makers doing on lending norms when all mess in lending was created. RBI slept even under R3 and any amount of MSM dramas can not whitewash that.

member_29172 · Post by **member_29172** » 20 Jun 2016 21:00

Rajan had some solid plans and some of his predictions about the global and Indian economy has been spot on.His major intention was apparently to play safe and sacrifice short term growth for gaining long term growth.

With that being said, his policies on interest rates and his strict leash on the economy was a bit too much.It's time to find someone else who is willing to take more risk while following R3's philosophy of playing it safe and having a concrete plan.

This "disgraceful departure" nonsense is another nautanki constructed by the sickular cartoons so lets be honest and see it for it truly is.

Rajan wasn't made the governor of RBI for life, his contributions were valuable but its time to adopt a new policy, time to change course and so R3 must retire. Plus putting your beak where it doesn't belong was bound to cause some backlash.
He is the governor of the RBI, a politically neutral position that deals with financial well being of the country and nothing else. Using his position as a governor to peddle his secular nonsense and repeatedly name calling India was completely unnecessary. This trend of celebrities commenting on politics and peddling their political agenda everywhere needs to stop.

All in all, he was good in many aspects and quite bad in others.His time is up and even he agrees with it. This whole BS about "no-go zone" and needlessly peddling some RSS guy into the equation is just another dirty of sickular brigade to turn this into another opportunity to bash Hindus and BJP as usual.

TSJones · Post by **TSJones** » 20 Jun 2016 22:59

....glad to see all of these pump-up-the-jam keynesians posting here......

Suraj · Post by **Suraj** » 20 Jun 2016 23:17

TSJ, you're out of your depth here. The issue with the departing RBI governor has very little to do with monetary policy.