 "Markets have factored in US Fed; China a bigger worry: Rajiv Mehrishi")
India's strong fundamentals would hold it in better stead compared to other emerging economies to tackle the effects coming from China, says Finance Secretary Rajiv Mehrishi. Mehrishi, whose tenure ends on August 31, tells Arup Roychoudhury and Indivjal Dhasmana that the legislative work on the proposed Monetary Policy Committee will be completed in this financial year. Edited excerpts:
Global markets have taken a beating due to fears over China slowdown and what the US Federal Reserve would announce on September 17. Will the volatility cease after any announcement on interest rate by the Fed?
Insofar as the Fed is concerned, I think the markets have already factored it in. Whichever market you take, it is difficult to say what will happen. The questions raised on China's economic growth are something that have an implication on everybody, most of all for commodity exporting countries. Whatever happens in China will have an impact across the world.
The prime minister is reported to have said that more reforms should be carried out to convert the situation into opportunities. What more can we expect?
Reforms are an ongoing process. They are not a one-time event or a reaction to any particular event. Reforms don't always mean big-bang reforms. So, to my mind, increasing public expenditure is a reform in itself. Getting your delayed projects back on track are also reforms in a way. We also need to get fundamental reforms done. India, at some time, needs to get reforms done in land, labour and capital. These things need to happen on all fronts, whether at the state or the Centre. Reforms are an ongoing process and will continue.
On Monday, the finance minister said that no package or measure was being announced by the Reserve Bank of India (RBI) or the government yet. But is there a threshold in terms of where the currency goes, or where the stock markets go that will compel you to take intervening measures?
India does not have a fixed exchange rate. The rupee is a free-floating currency dictated by market forces, so ascribing an absolute value to the rupee would be incorrect. The value of rupee will be determined by the market and it will depend on so many circumstances. We have to see exchange rates vis-à-vis other currencies. In the past one year, we have been strengthening against currencies other than the dollar. So, as long as our real effective exchange rate is broadly in line, the market will take that into account. As far as an intervention is concerned, that is dealt with by the RBI.
Your tenure as finance secretary ends on August 31. Will that be extended? What plans do you have after retirement?
I believe that when a person's time comes, he must go. My time is up, so I must go. I want to spend time with my parents in Jaipur. I want to catch up with things I always wanted to do, such as writing, reading and indulge in other hobbies. I think I deserve rest.
Global markets have taken a beating due to fears over China slowdown and what the US Federal Reserve would announce on September 17. Will the volatility cease after any announcement on interest rate by the Fed?
Insofar as the Fed is concerned, I think the markets have already factored it in. Whichever market you take, it is difficult to say what will happen. The questions raised on China's economic growth are something that have an implication on everybody, most of all for commodity exporting countries. Whatever happens in China will have an impact across the world.
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I have always held that the markets are not the best indicators of economic health. Our markets' decline on Monday was in line with most of the developing economies'. India has relatively less to worry because our macro-fundamentals are in place. Inflation is under control, decline in commodity prices helps us since we are a net exporter, and our current account deficit is very much under control. For India, this may be an opportunity to build on its strengths further.
The prime minister is reported to have said that more reforms should be carried out to convert the situation into opportunities. What more can we expect?
Reforms are an ongoing process. They are not a one-time event or a reaction to any particular event. Reforms don't always mean big-bang reforms. So, to my mind, increasing public expenditure is a reform in itself. Getting your delayed projects back on track are also reforms in a way. We also need to get fundamental reforms done. India, at some time, needs to get reforms done in land, labour and capital. These things need to happen on all fronts, whether at the state or the Centre. Reforms are an ongoing process and will continue.
On Monday, the finance minister said that no package or measure was being announced by the Reserve Bank of India (RBI) or the government yet. But is there a threshold in terms of where the currency goes, or where the stock markets go that will compel you to take intervening measures?
India does not have a fixed exchange rate. The rupee is a free-floating currency dictated by market forces, so ascribing an absolute value to the rupee would be incorrect. The value of rupee will be determined by the market and it will depend on so many circumstances. We have to see exchange rates vis-à-vis other currencies. In the past one year, we have been strengthening against currencies other than the dollar. So, as long as our real effective exchange rate is broadly in line, the market will take that into account. As far as an intervention is concerned, that is dealt with by the RBI.
Your tenure as finance secretary ends on August 31. Will that be extended? What plans do you have after retirement?
I believe that when a person's time comes, he must go. My time is up, so I must go. I want to spend time with my parents in Jaipur. I want to catch up with things I always wanted to do, such as writing, reading and indulge in other hobbies. I think I deserve rest.