PTI Photo by Shirish Shete
PTI Photo by Shirish Shete

New Delhi : Former RBI Governor Raghuram Rajan has said that the rupee has not depreciated to ‘too worrying levels’, though the government needs to take care of the widening current account deficit (CAD).

The rupee on August 16 had slumped to a life-time low of 70.32 on strong demand for the US dollar.

The rupee on Friday staged a good recovery to end higher by 20 paise at 69.91 against the US currency on bouts of dollar selling by exporters and corporates. “Well just to be fair, the Indian authorities have brought down the fiscal deficit. What has expanded is the current account deficit. A lot of it driven by higher oil prices,” he said.

“The rupee has not depreciated to too worrying levels, its sort dollar strength around the world,” Rajan told a TV channel. Rajan, who was RBI governor for three years till September 2016, said further that this is a time where countries should be focusing on getting the macro stability in order.

“Going into election year, countries like India and Brazil should try their level best to look as good as possible,” he said. On the controversy over back series GDP data which showed that the growth was better during UPA regime, Rajan said: “What we have to do right now is to look forward…it’s growing at about 7.5 per cent.” India, he added, has to make sure that CAD does not grow out and fiscal stability is maintained. Replying to a query on rising bad loans, Rajan said there is a need to improve governance in the banks.

“My sense is that whichever new administration comes this will be task number one for them,” Rajan, who is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth School of Business said.

India’s trade deficit soared to a near five-year high of $18 billion in July, raising concerns on the current account front.

Ex-RBI chief warns of toxic mix on trade

MUMBAI: Raghuram Rajan is now cautioning that trade wars when combined with a build-up in leverage and high asset prices could result in a toxic mix that would be a drag on global growth.“We are all very well aware that two things have built up, which had built up before the previous crisis, leverage and asset prices,” Rajan said on Thursday. “Trade is an issue for the world to be concerned about. It is extremely important that we have good outcomes there. By all means negotiate, but don’t pull the nuclear trigger there.” While global growth has been strong in recent years, the concern is how long can it continue, and whether elevated asset prices are justified on the basis of it, Rajan said at Jackson Hole, Wyoming, the same place where he warned of credit risks in 2005. Moves by the US or China on trade threaten that growth at a time when underlying conditions are fragile, and some emerging market nations are highly levered, he said.

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