The battle we are really fighting today is for credibility: Raghuram Rajan

The battle we are really fighting today is for credibility: Raghuram Rajan: Interview with Governor, Reserve Bank of India

My VIEW
Learn from Dr Rajan who is willing to teach

Excerpts:

RBI Governor on the content of Box 1.6 of Economic Survey 2016*( proposal to use RBI's capital to recapitalise PSBs):

“Whoever wrote that piece does not understand monetary policy and monetary balance sheets as well as they should. There is an equity position that the RBI has. Think of this as government assets in RBI. The government's liabilities are its debt. What is being suggested is that we actually monetise this amount. If we have X number of crores by which we can monetise our assets, if we give half of that to the government, the residual value of it is always spent on buying government bonds. What we are saying is, given those constraints, any money given extra to the government will reduce our ability to buying government bonds directly and will have absolutely no effect on the public sector borrowing requirements. The government will have to find some other place to sell its assets. It is not a free asset to be given. We are saying 'treat it as a government asset'. It's not going to impact your borrowing requirement.”

Hats off to Rajan!
M G WARRIER, Mumbai

 *At an interaction with media on April 5, 2016

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