ARE WE READY FOR THE NEXT GLOBAL FINANCIAL TSUNAMI

Everyone salutes the rising run, that is absolutely true both in the case of R3 (Raghuram Rajan) and MSD (Mahendra Singh Dhoni). Why, because both can be replaced any time. Both termed as game changers are subject to acute criticism, just because people think there time is over. Like politicians, analysts are also playing the Indian blame game, though a subtle and a veiled one as one of them in the monetary policy conference asked whether the Governor would be there to oversee the whole FCNR bonds redemption process in September- November period this year.    

In September 2013, when global currency markets were writing obituaries for Indian rupee, RBI opened a special swap window for Indian banks at 3.5% annually for a tenor of 3-5 years for raising Foreign Currency Non Resident bonds to stop outflow of dollars from the Indian economy initiated by US Fed tantrums and augmented by what pink papers termed then as policy paralysis. So now that the redemption of FCNR bonds of around $ 26 billion fully covered with RBI’s forward purchases is just round the corner, it has started appearing like a self planted land mine.  Short term volatility is expected in the currency markets at the time of redemption which can be easily smoothened by RBI intervention by supplying dollars to banks to honor their commitments without even using the forex reserves which stand at $ 363 billion.  This short term event would be over in less than 2 months and Indian currency markets along with Indian Rupee will be back on track. But what about the financial weapons of self destruction planted all over the world ticking every second making this financial world volatile, uncertain and unpredictable. Can no one hear the deadly ticking in the US economy with FED having no idea, which wire to cut to defuse it, what about the Chinese conundrum, the Middle East oil crises and yeah Brexit. All of these need to be cleared and diffused.

We can’t go and vote for British referendum or get Lehman Brothers again to court, but we can of course put our house in order. What will we do if there is another financial Tsunami. Instead of playing this blame game, why don’t the self proclaimed learned generals of our economy gather consensus for passing GST which will fortify us and enhance our GDP by 1.5% or prepare for rising crude price which might cross $70 in next few months.  This list could go on…. Right now in the present uncertain scenario change in captaincy will add to short term volatility, so are we ready for this with Rupee Dollar exchange rate already crossing 67. Whatever might be the decision the good work initiated by RBI under Dr. Raghuram Rajan has at least diffused PSU banking sector suffering for over 20 years saving the Indian economy and general public for decades to come.