Brexit: Raghuram Rajan, Arun Jaitley say India well prepared for any eventuality

Even as stocks, currency and commodities markets faced relentless fall since early trades owing to UK’s decision to leave the European Union, India’s central bank governor Raghuram Rajan tried to douse off the fear, saying it is prepared for any eventuality and will intervene in currency markets whenever necessary.

Along with other Asian currencies, the rupee, too, lost considerable ground and slumped to a 4-month low intra-day to hit 68.22 level against the dollar, down 97 paise or 1.43 percent over previous day’s close of 67.25. Although, the currency has marginally recovered, it is still down 73 paise or 1.1 percent to trade at 67.98 against the greenback.

On the interest rate front, Rajan said, “We are accomodative and data dependent.”

He further added that Indian economy has good fundamentals along with low short-term external debt and sizeable foreign reserves.

In the wake of plunging markets, finance minister Arun Jaitley also tried to calm down the markets following the mayhem caused by the UK’s exit from EU. “We are well prepared to deal with short and medium-term consequences of Brexit. We are strongly committed to macroeconomic framework with rock solid commitment to fiscal discipline.”

He also emphasised that India’s strong forex reserves position will offset short-term volatility in the currency markets. “Immediate, medium-term firewalls solid in form of healthy forex reserves. The government and RBI are prepared to deal with any short-term volatility,” said Jaitley.

He also said, “Our aim will be to smoothen volatility and minimise Brexit impact on the economy in the short-term.”

Even as the government and RBI are trying to soothe the wrecked nerves of the investors, benchmark Sensex today witnessed its biggest fall in 10 months, tanking 1,036 points intra-day to touch a low of 25966.14, thereby wiping out Rs 4 lakh crore of market-cap. The index last crashed 1,624.15 points on 24 August, 2015, when investors pressed the panic button following slowdown worries in the US and China.

Surprisingly, 10-year benchmark bond traded at 7.47 percent compared to yesterday’s close of 7.48 percent, indicating that investors turned risk-off and placed their bets on safe havens such as government securities.

With PTI inputs