Rajan effect-Sensex regaining lost charm

Rajan effect-Sensex regaining lost charm?

Raghuram Govinda Rajan- NEW Face of RBI

Highly pressured situation like monitoring and maintaining dwindling currency rates, chalking out a recovery process thereon, maintaining a close watch dog like situation would almost catch up with even the best man running the show and when. Immediate move on from the very first day! Hard to believe ah! But yes, there are exceptions in form of some superhumans who can turn tables upright down and make impossible things look possible.   

       MR. Rajan on way to OATH Ceremony at RBI HQ.

Mr. Rajan after taking the reigns of R.B.I from former chief D.Subba Rao

My privilege to present the future leader cum savior of dwindling Indian economy and reviving markets. Touted as one man Army by his predecessor Mr. Duvvara Subba Rao, the former RBI governor of India praised his successor Raghuram Rajan-Present Indian RBI governor who might have miles to go for reviving our dwindling economy and currency rates. However unlike any other normal person, he got down to the business in a jiffy the very next moment he took the reins of governorship of RBI on September 5^Th 2013.

              Raghuram Govinda Rajan  was always a champion in any field-then be it academics, physical field as well as holding key posts in the past like being

·        Chief economic advisor to Indian ministry of finance in previous fiscal year.

·        Chief economist at IMF (International Monetary Fund) from year 2003 to 2007.

·        His act of foreseeing future came true as he had aptly predicted in 2005, the great recession of 2008.

              

The quagmire of recessed economy, depreciating currency value against other currencies, slowing growth, high inflation as well as account deficit might be a big challenge in front of Mr. Rajan. However he buoyed the rising concerns with an ever optimistic smile stating that his agenda to attack the growing menace would have a mix of certain popular steps/ideas taken from his previous counterparts in office as well as unpopular never heard agenda would also be on cards.

                            Quick to analyse the surmounting economic crisis plus plethora of unlikely and unrealistic events like GDP growth touching all time low of just being at 4.4%, inflation rate touching 5.79%, a steep rise of 7.72% than the last year saw surging rise in all essential commodities as well as even electronic and other goods. Biggest challenge faced in front of Rajan and his new team is about taming rupee tumble which has been the worst since 1991 crisis viz at 20% as taken by close media sources. Hence like any other offie in the business, he announced a set of remedial measures which contains right mix of already existing measures as well as some unpopular and unheard tactics.

                          Some of the prominent steps induced in RBI fold for very first time are as given below:

         i.    Enhancing exporters limits and allowing more investments from foreign companies giving a stake of 400% of net worth of company which is currently increased from 100% net worth, but the catch is that funds must be accumulated only through ECB’s (external commercial borrowings).

        ii.    Decreasing banks mandatory holding of government securities like Treasury bills (T-bills), CMB’s (Cash Management Bills), Dated government securities like State Development Loans (SDLs), National Savings Certificate and other forms of securities for enhancement of free up capital for lending purpose.

      iii.    Special concessional window to swap FCNR (foreign currencies non-resident) deposits through which banks can mobilize and bring in huge turnover worth $10 billion from swapping the foreign currencies.

      iv.    He also announced in his debut speech that banks would be freed from RBI in setting up new branches to which both PSU banks, government and even private banks have welcomed move as increased branches plus more power helps in enhancement of transactional abilities and attracts lot more investors. It also puts an end to 25 years of jurisdiction from RBI, though RBI can still hold power of changing, monitoring rules formulated by the banks.

       v.    He has also gone for conversationalist approach by having proposed the issue of inflation-indexed bonds linked to the consumer price index, an indication that the central bank may soon shift its inflation benchmark from the wholesale price index.

      vi.    RBI in tandem with new governor’s explicit ideas have allowed all banks to borrow from overseas market to increase to 100%, up from earlier limit of 50% on unimpaired Tier I capital as at the close of the previous quarter, with an upper limit of $10 million.

                          It seems that the way Mr. Rajan has started his campaign with new fresh, affirmative ideas have finally paved way for a great leadership as well as have given a fresh lease of hope as Indian markets-both equity & debt, stock market, sensex welcomed all initiatives as one would really be surprised as rupee surged ahead for fourth consecutive session to set a record hike of 6% and is highest since 1973. It closed 63.84 yesterday a gain of 2%. There were positives from sensex arena too as rupee made a strong recovery and benchmark sensex rose 3.77% to close on 727.04 points, biggest since May 2009. NSE also surged ahead by 3.81% to close on all time high of 5896.75, highest ever since 2009.

                        It also bought great news as for the very first time since July last year, trade deficit narrowed down to $10.9 bn than 12.2 bn as observed at start of this year. Kudos to his legitimate decisions and leadership skills, the exports have now risen to 13%, thus putting a year end drought on trade deficit.

                  So far so good…… He has the perfect vision and has perhaps done something which looked distantly impossible till few months ago and when! Just joined and going stronger from day one!

However the query mostly famous in media, trade and financial analysts cum advisor is that

A) Can he continues on the good work and if so till how long?

B)  How effective can his strategies work and can it deliver key results against all odds like inflation, depleting currency and so on……       

                             

                           Though a highly pressure cooker situation, time only might tell if he can be a savior or just be like the other people in business. But hoping he would be a game changer and will revive olden smooth days back in India.