BEIJING: Reserve Bank of India governor Raghuram Rajan has expressed support for China’s efforts to internationalize theYuan and make it part of the currencies favored by the International Monetary Fund.
“I do not know what the ultimate requirements of the IMF are and how much of these China has met. But the IMF does need to accommodate currencies of large economies with strong positions in global trade and finance, and clearly China has made a lot of progress on both counts”, he said in an interview with the Hong Kong-based South China Sea.
China has been seeking the support of major countries in its efforts to internationalize its currency and persuade the IMF to admit the Yuan in its favored basket of currencies for special drawing rights.
The RBI chief’s backing is expected to further its cause.
Rajan also defended China against criticism that it had indulged in competitive depreciation of its currency.
“Currencies elsewhere were already depreciating in a large way even before the Chinese move because of the unconventional monetary policies adopted by some countries.
“It is not reasonable to say the Chinese move precipitated the trend. Second, given the small scale of the Chinese devaluation, it cannot be blamed for a currency war,” Rajan said.
The RBI chief also said that the present economic slowdown in China is affecting the Indian economy.
“But India being a commodity importer, has been helped a bit by cheaper commodities. So the impact has not been as bad as it could have been. Still, on the whole, we have been adversely affected by the Chinese slowdown because China’s slowdown has impacted global growth and India is very well integrated into the global economy,” he said.
Speaking at a conference in Hong Kong, the RBI chief expressed concern about the deceleration of private investments in India.
“On the growth front, the central concern is with investments. Private investment has fallen back quite a bit and so has public investment,” he said.
He expressed the hope that strong flows of foreign direct investments and some traction in infrastructure financing would help deal with the problem of lowered domestic investments.
This month, India relaxed foreign direct investment norms in 15 major sectors, including mining, defense, civil aviation and broadcasting.
“We are seeing a lot of traction in FDI, in both announcements and actual investments on the ground,” Rajan said. “Once we start seeing a little stronger demand, we will start seeing more projects being pulled out of the drawer.”