RBI governor to meet FPIs, senior fund officials

 

Mumbai: Amid sell-off by foreign portfolio investors (FPIs) and pressure on the currency, Reserve Bank of India (RBI) governor Shaktikanta Das would hold a closed-door meeting with overseas fund managers and have separate session with a handful of senior fund officials in Singapore this week when, some think, the central banker could hint large investors about a possible soft landing for the Indian economy. Of late, the RBI has come under criticism for slipping on inflation forecasts and falling 'behind the curve' in raising benchmark interest rate - observations that officials of the monetary authority have been trying to counter. "While the meetings in Singapore, ahead of the G20 summit, were scheduled well before the more recent market turbulence, some of the obvious questions may crop up. But, typically, Das on such occasions take feedback from participants. Besides giving an India overview and signalling a likely soft-landing, I would expect him to absorb the views of international investors on recession in the global context, impact of commodity prices and their estimates on GDP and inflation," a senior fund advisor told ET. "It's possible that the Governor may open up a little more at the meeting with select fund officials," said the person. The G20 central bank governors and finance ministers will meet in Bali on July 15-16.

 

In early April, RBI had revised the inflation forecast for 2022-23 to 5.7% (from 4.5% it had projected in February), and in June the number for the current fiscal was raised to 6.7%. The revisions, in quick succession, have drawn the attention of almost everyone across financial markets. In early July at a meeting in Khandala, where RBI had invited several economists and analysts, senior officials defended the central bank's policy and actions. "RBI is putting a lot of blame on the war and Ukraine situation for the inflation numbers. It has become a little defensive, even agitated, about the inflation commentaries and taking the opportunity to explain the situation - particularly because some in the market gathered the impression that the RBI had relied on the somewhat unrealistic 4.5% inflation forecast (made in February), to delay rate hike. It's trying to correct that perception. Maybe, it's partly working. Post the Khandala meeting articles by a few economists have been more supportive of RBI," said a senior banker. "There was no hawkish language. But one of the messages that clearly came out was: more than monetary policy, it's the course of the war that would influence inflation," said a person who attended the weekend event. Since October 1, 2021, when FPIs started paring their positions, foreign fund managers net sold ?25,7982 crore stocks and ?26,468 crore bonds till date. The rupee, hurt by outflows and global uncertainties, recently touched a new low of 79.38 against the dollar last week with the dollar index (which measures the strength of the US currency against a basket of 6 units) rising. The rupee has fallen 6% since January.

 

-Economic Times, 11th July 2022.