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By the time you read this, Dr. Raghuram Rajan, our new RBI Governor would have completed his first month in office. Ever since he assumed office (an un-envious thing to do in the present circumstances), Dr. Rajan has taken key policy steps that have helped stem the fall in rupee, led to a recovery in stock markets and soothed sentiments in bond markets. In his inaugural speech as the RBI Governor on the day he took office, he clearly outlined the roles and responsibilities of the Central Bank, when he said – “The primary role of the central bank, as the Act suggests, is monetary stability, that is, to sustain confidence in the value of the country’s money. Ultimately, this means low and stable expectations of inflation……”, and, “I talked about the primary role of the RBI as preserving the purchasing power of the rupee, but we have two other important mandates; inclusive growth and development, as well as financial stability”. The best part is his focus on retail CPI inflation as is evident from the recent repo rate hike and the announcement on issuance of Inflation Indexed Savings Certificates linked to the CPI New Index to retail investors by end- November 2013. Another statement that warrants attention is – “To the existing traditions of the RBI, which will be the bedrock of our work, we will emphasise 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 ….” At a time when investors seem to be losing faith on Central Banks, this statement comes as a welcome relief. The last thing investors want is unpredictability. A predictable policy environment shall go a long way in cementing faith of investors in the financial and investment markets.

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