Renowned economist and the new governor of the Reserve Bank of India, Raghuram Rajan, said that the country's economy was "fundamentally sound" and had a "bright future" in his first remarks after taking the helm at the central bank.
Rajan's was easily the most substantive speech by a RBI Governor on his first day in office.
Just two hours after the formal signing-in ceremony and a warm hug from his predecessor, Rajan got down to business in a manner that surprised everybody.
He unveiled a bold, new RBI with a slew of reforms, many of them focused on "protecting the value of money."
Rajan had not been expected to make specific policy changes on the day he was sworn into office, but he announced short-term measures.
"It involves considerable change, and change is risky," he said of his agenda in a televised news conference. "But as India develops, not changing is even riskier."
Among the measures he promised for coming months were that existing banks would be able to open new domestic branches without RBI permission and that long-awaited new banking licenses would be issued by January.
The central bank will also soon issue inflation-indexed savings certificates and take steps to encourage financial services for the poor, including making payments easier through mobile banking, he said.
He also pledged to improve the system for banks to recover bad loans by accelerating the work of debt recovery tribunals and asset reconstruction companies.
Rajan plans his first full policy address on September 20.
"Some of the actions I take will not be popular," he said, but added, "The governorship of the central bank is not meant to win one votes of Facebook 'likes.'"
Market participants were impressed that Rajan had set the ball rolling on his very first day at RBI with a series of announcements, raising expectations that more are in store.
"People are likely to take a great deal of confidence from his words and a lot of the volatility that we have seen in the rupee lately may not be seen in the future," Motilal Oswal of Motilal Oswal Securities said of the speech.
His full speech:
Why the speech
I took charge this afternoon as the 23rd Governor of the Reserve Bank of India.
These are not easy times, and the economy faces challenges. At the same time, India is a fundamentally sound economy with a bright future.
Our task today is to build a bridge to the future, over the stormy waves produced by global financial markets. I have every confidence we will succeed in doing that.
Today I want to articulate some first steps, concrete actions we will take, as well as some intentions to take actions based on plans we will formulate.
Before I turn to specifics, let me repeat what I said on the day I was appointed.
The Reserve Bank is a great institution with a tradition of integrity, independence, and professionalism. I congratulate Dr Subba Rao on his leadership in guiding the bank through very difficult times, and I look forward to working with the many dedicated employees of the RBI to further some of the important initiatives he started. I have been touched by the warmth with which the RBI staff have welcomed me.
To the existing traditions of the RBI, which will be the bedrock of our work, we will emphasize two other traditions that become important in these times: transparency and predictability.
At a time when financial market are volatile, and there is some domestic political uncertainty because of impending elections, the Reserve Bank of India should be a beacon of stability as to its objectives. That is not to say we will never surprise markets with actions. A central bank should never say "Never"!
But the public should have a clear framework as to where we are going, and understand how our policy actions fit into that framework.
Key to all this is communication, and I want to underscore communication with this statement on my first day in office.
Image Courtesy: AP