Perspectives: The Month Through India’s Eyes
This month, the Indian news media focused on a mix of economic and political news. News sources weighed in on the appointment of a new Governor for the Reserve Bank of India, the recently concluded state elections and the long-awaited extradition of absconding businessman Vijay Mallya.
India’s Appoints New Governor for the Reserve Bank of India
This month, the Indian government appointed Shaktikanta Das – an erstwhile official of the Finance Ministry – to the newly vacant position of the Governor of the Reserve Bank of India. Media outlets weighed in on the choice of candidate and the possible long-term implications on the RBI and markets.
The Business Standard hailed Das’ appointment as good news and an opportunity to reform the organization after his predecessor’s tenure. “The changeover at the RBI is… an opportunity to rebuild the central bank’s… credibility with financial markets… While [the erstwhile Governor’s] surprise resignation prompted fears of increased market volatility, the reaction was generally positive — a sign that markets hope the RBI’s bias will be removed and tensions with the government eased under a new governor… A new RBI governor and a possible course correction in monetary policy should allow the tailwinds of structural reforms of the past few years to push growth to its higher potential without boosting inflation. That could only boost the bank’s reputation, not tarnish it.”
The Telegraph also commended the selection for the new Governor and wrote about the important task ahead for him of balancing the Centre’s demands with long-term macroeconomic stability. “Mr Das comes with a solid reputation of being an upright individual who will now have the task of restoring the credibility of the central bank and ensuring that its autonomy is not compromised… [Mr Das] will have to walk a tightrope as he tries to balance the demands of the Centre for the RBI’s funds and the need to maintain a certain level of contingency reserve to meet unforeseen circumstances… The new governor has hit the ground running. At his first press conference, he promised to hold consultations with all stakeholders including the government. He intends to adopt a flexible stand on contentious topics while seeking to uphold the autonomy of the institution… There are tough negotiations ahead — and Mr Das will be subject to intense scrutiny over his actions.”
A columnist for Business Today highlighted the challenging road before Das and the need for economic reform. “Das has to deal with five issues quickly. One, whether there is any merit in the government’s view that the Prompt Corrective Action (PCA) should be relaxed for the public sector banks. Two, if there is really a case for relaxing interest rates and improving liquidity rapidly for SMEs and others. Three, whether to go slow on the NPA action that the RBI had prescribed against sick power producers. And four, whether to part with a chunk of the reserves as the government desires. There is one fifth task – dealing with powerful private sector bank promoters.”
Analysis of the Recently Concluded State Elections
This month, the five Indian states of Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram held elections for their legislatures. The leading opposition party – the Congress – emerged as the single largest party in the key states of Rajasthan, Madhya Pradesh and Chhattisgarh. News outlets weighed in on the insights from the election results and the outlook for the 2019 general elections.
Money Control highlighted the Congress’ gains but also pointed out important learnings for the party in Rajasthan and Telangana. “The BJP can take solace in the victory of the TRS in Telangana as this would make consolidation of opposition parties difficult, and in the victory of the MNF in Mizoram. The defeats are a setback, but it is unlikely to have a direct impact on the 2019 polls. Also voting percentages and margins of victory in many seats in the Hindi heartland states are not significant to be happy about… to extrapolate that the results will be reflected during the Lok Sabha polls is to read too much, too quickly. The Congress’ performance in Chhattisgarh and Madhya Pradesh should be commended… However, the Congress also has reasons to worry. Its performance in Rajasthan shows how it almost snatched defeat from the jaws of a comfortable victory… The grand old party’s loss in Telangana shows that it has to choose its allies wisely for the 2019 general elections — a good strategy would be to go in for post-poll alliances as it did in Karnataka rather than a pre-poll grand alliance as seen in Telangana.”
The Indian Express similarly drew lessons for the Congress even from its victory. “The outcome [of the Rajasthan election] has surprised many because most pre-poll and exit poll surveys were predicting a comfortable victory for the Congress. Early this year, the BJP had suffered a severe drubbing in the by-elections… There was a strong feeling of discontent with the BJP government led by Vasundhara Raje… The Congress has won but even in its victory, the party must be thinking as to what prevented it from sweeping the polls despite the negative sentiment against the Raje government… Early on during the election process, the party could not work out a mutually agreeable alliance with the BSP… [and the tie-ups with other parties] became a liability for the Congress… The Congress stumbled once again with the delay in declaring its candidates. Once it finally did, there was an avalanche of disgruntled leaders who left the party on being denied a ticket… The Congress was also slow to declare its manifesto, which has not projected as to how the party differs from its principal rival.”
India Today highlighted the results as a threat to the invincibility of the BJP and a wake-up call for the party. “The mandate has derailed the BJP juggernaut and brought in a template that reads, “BJP is not invincible”, and barely months before the Lok Sabha polls… [However,] the road ahead is still not easy for Rahul. Congress is struggling in many crucial states like UP, Bihar, West Bengal and Odisha… The defeat of [BJP’s] three regional satraps… will multiply [its] dependence on PM Modi as a vote-getter… the BJP has to ascertain whether the disillusionment among these segments is more a factor of state-level anti-incumbency – and not a verdict on the performance of the Modi government… The BJP feels that in 2019 Lok Sabha polls, the issues in vogue would be more conducive for its star campaigner and his five-year term would be the rallying point.”
UK Court Orders Extradition of Absconding Businessman Vijay Mallya
This month, a UK court ordered the extradition of fugitive liquor baron Vijay Mallya who faces allegations of money laundering and loan defaults to the tune of US$1.3bn. The Indian news media unanimously commended the move.
The Hindu lauded the move as a victory for India’s extradition efforts. “Coming shortly after the United Arab Emirates handed over Christian Michel, the alleged middleman in the AgustaWestland helicopter deal, progress in the Mallya extradition case is another victory for the Central Bureau of Investigation… On preliminary evidence, in an order that analyses documents and the sequence of events relating to borrowings made by Kingfisher Airlines from IDBI Bank, [Chief Magistrate Emma Arbuthnot] concluded that there is a prima facie case against Mr. Mallya as well as some bank officials… It is clear that fleeing India in March 2016 while a consortium of lenders to the defunct airline was seeking to recover about [US$1.3bn] from the company has not helped Mr. Mallya’s cause, beyond buying him time… With the court also having spoken of a prima facie case of money-laundering being established, Mr. Mallya’s attempt to play victim has failed. It is only appropriate that he be brought back to India at the earliest and made to submit himself to the legal process.”
Money Control similarly commended the news and noted that it paves the way for extraditing other similar offenders like Nirav Modi and Mehul Choksi. “The country’s largest lender State Bank of India (SBI) said this week, that the extradition of fugitive liquor baron Vijay Mallya from the UK to India will speed up the recovery of over [US$1.3bn] of loans. SBI chairman Rajnish Kumar told reporters that a higher recovery of loans is now a possibility. He said, and we quote, “The message is very loud and clear. What we have to understand is that it (extradition) is a message that you just can’t default and run away from the country. Lending is an important business for both lenders and borrowers as we need investment in the country. But the message is that you have to do clean banking and you have to be very careful about what is the purpose of the money lent.”… What seems likely now is that if Mallya’s extradition is carried out successfully, it will pave the way for the extradition of Nirav Modi and Mehul Chowksi, wanted in the biggest-ever banking fraud of over [US$1.9bn] at Punjab National Bank.”