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Will do all to restrict volatility in event of Brexit: Rajan

 PTI |  2016-06-21 23:52:21.0  |  Mumbai

Will do all to restrict volatility in event of Brexit: Rajan

Reserve Bank Governor Raghuram Rajan on Monday said Brexit could be “quite damaging” if it happens, but India is adequately prepared to face any consequences. “We will do what it takes to moderate market volatility,” he said to a question at an event of the Tata Institute of Fundamental Research here. 

“I am not saying (there will be) no volatility, but once the initial bout or wave abates, people (will) look for good fundamentals,” Rajan said. Rajan, who last week said he will be heading back to academics after the end of his term in September, also said some people are also saying Brexit may have an impact on the presidential elections in the US. 

“The US elections are also fraught with potential risks,” Rajan said, to a wide laugh, without naming anybody. On Brexit, Rajan said there are various sets of preparations, starting with monitoring the markets and ensuring “we have good policies”. He termed the maturing of NRI deposits later this year, another key concern on the external front, as “not significantly worrisome” and added that there are “plenty of reserves” to deal with any situation. 

“Brexit can be quite damaging if it happens,” he conceded. Markets have already factored in risks that will follow if the Britons choose to leave the European Union in the referendum on Thursday, he said. The world markets rallied today after opinion polls showed a decline in the probability of Britain leaving the EU, he noted. 

MPC formation at final stage, members to be named by July
Formation of the Monetary Policy Committee entrusted with the task of deciding interest rates is at an advanced stage and the government will soon appoint members of the high-level panel. “The appointment process is at a very advanced stage. There are no roadblocks left. Members can be announced in the next month as candidates have been short-listed,” sources said. The six-member MPC will include RBI Governor and three nominees of the government, which has a mandate to bring consumer or CPI inflation to the pre-set target. The next policy may be announced by MPC if things are in place by then, sources added. 

The next bi-monthly monetary policy for 2016-17 is scheduled for August 9. The non-government nominees on MPC include the Governor himself, who is the the ex-officio chairman, a Deputy Governor and an executive director of RBI. Each member shall have one vote and in the case of a tie, the Governor shall have the casting vote. Members will be appointed for four years and shall not be eligible for reappointment. The panel will meet at least four times in a year and the government may, if it considers necessary, convey its views in writing to MPC from time to time. Every six months, RBI will publish the Monetary Policy Report explaining sources of inflation and its forecast for 6-18 months.

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