Slowdown to bad debts: Shaktikanta Das’s balancing act is becoming tougher

As the economy slows, the Reserve Bank governor will find it tough to keep all the balls in the air in the many roles he performs.

Soon after taking over as India’s central bank governor almost a year ago, Shaktikanta Das decorated his 18th floor office overlooking the Arabian Sea with two statues of Lord Jagannath, a form of the Hindu god Vishnu.

Revered in Das’s native Odisha state, Jagannath is depicted with round, lidless eyes that are always watching over the welfare of devotees. It’s an appropriate adornment.

Das, overseeing what was until recently the world’s fastest-growing major economy, has worked tirelessly to restore relations with the government after a bitter public spat led his predecessor Urjit Patel to quit. Colleagues say Shaktikanta Das usually tucks papers under his arms at the end of the work day to continue plugging away from home.

He’s paid a hefty dividend to the finance ministry, swung into stimulus mode and eased up on bank lending restrictions—all of which Patel resisted in the face of government pressure. But there’s still much to do: the economy is losing steam on many fronts, the banking sector remains saddled with one of the world’s worst bad-debt loads and the government’s fiscal targets are slipping by the day.

Insiders say Das has turned around the mood in the bank’s Mumbai headquarters with an affable, plain-spoken approach. As one official said: He listens to everyone and then sticks to his own decision.

Among the RBI rank and file, the more academically-decorated predecessors of Patel and Raghuram Rajan were considered outsiders due to their long stints in American academia. Long-timers were put offside as in-house talent was often bypassed in senior appointments. Not with Das: in the job posting for a deputy in-charge of monetary policy, at least 25 years of government experience within India tops the priority list among requirements for the role…

Explained: Why poorer nations can’t just print more money and become rich

When Zimbabwe was hit by hyperinflation, in 2008, prices rose as much as 231,000,000% in a single year

Economy News: Curious Kids is a series for children of all ages, where The Conversation asks experts to answer questions from kids. All questions are welcome: find out how to enter at the bottom of this article.

Why don’t poorer countries just print more money? – Clementine, age 12, London, UK

Thanks for the question, Clementine. When a whole country tries to get richer by printing more money, it rarely works. Because if everyone has more money, prices go up instead. And people find they need more and more money to buy the same amount of goods. (Click Here: Business Standard OR BS)

This happened recently in Zimbabwe, in Africa, and in Venezuela, in South America, when these countries printed more money to try to make their economies grow. As the printing presses sped up, prices rose faster, until these countries started to suffer from something called “hyperinflation”. That’s when prices rise by an amazing amount in a year.

When Zimbabwe was hit by hyperinflation, in 2008, prices rose as much as 231,000,000% in a single year. Imagine, a sweet which cost one Zimbabwe dollar before the inflation would have cost 231m Zimbabwean dollars a year later….Read Full Story

Urjit Patel’s quiet exit from Reserve Bank doesn’t really help India

Patel’s decision to leave rather than accept the threat to the RBI’s autonomy has a certain nobility. But he might have offered a fuller explanation of the circumstances behind his exit

Finance: People who know Urjit Patel, the Reserve Bank of India governor, told me he would stay on and fight. That was in late October, when it became clear from his deputy’s speech that New Delhi was making a determined attempt to curtail the RBI’s authority as a banking regulator, and even to raid its capital.

But after a November meeting of the institution’s board, it looked like the central bank and the government had decided not to bring matters to a head and Patel, whose term expires in September 2019, would stick around. The truce was short-lived. Citing personal reasons, the governor said on Monday that he’d be stepping down immediately, just days before another crucial meeting of the RBI board. The terse resignation note made no attempt to thank the country’s finance minister or Prime Minister Narendra Modi, both of whom said goodbye to Patel on Twitter.|Urjit Patel

Indian markets are already jittery about state elections, whose outcome will be known Tuesday. Any sign that Modi’s popularity is waning amid a deepening agrarian crisis would make investors nervous ahead of general elections next year. An uncertain period for India’s politics just as its central bank’s integrity is under assault could accelerate the $2.9 billion flight of foreign capital from the country’s equity markets this quarter.

Patel’s decision to leave rather than accept the threat to the RBI’s autonomy has a certain nobility. But he might have offered a fuller explanation of the circumstances behind his exit. Has the government used (or threatened to use) Section 7 of the RBI Act to instruct the governor in the “national interest?” If so, we need to hear from Patel about what exactly he was being told to do. Release state-run banks — loaded down with bad debts — from lending restrictions? Relax a circular that made it hard for errant corporate borrowers to avoid bankruptcy courts? Give a special dividend to the government?

Click Here —BUSINESS STANDARD OR BS