“India has foreign exchange reserves of around USD 380 billion and it would be used if needed to subdue the volatility in the currency market,” Raghuram said on the sidelines of a banking conference held here.

According to him, if there is undue volatility then the country has the resources to manage it. The rupee hit a fresh two-year low of 66.47 to a dollar.

Speaking at the conference, Rajan referring to his earlier comments that the central bank is not a cheerleader for the economy said it was not the role of RBI to elevate sentiments unduly to deliver booster shots to the stock markets.

"Instead, what is important is sustained low inflation, something the Prime Minister emphasised in his Independence Day speech, and rate cuts are a natural consequence that the RBI has no hesitancy in delivering," Rajan said.

He said there was much to be optimistic about the economy as massive investments are starting in infrastructure; radical changes in the financial sector; tremendous sweep of information technology across every facet of Indian life.

According to him, what sets poor nations apart from the rich was not people or resources or even luck but good governance, which comes from strong frameworks and strong institutions.

 

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