India names Modi demonetization backer as cenbank head

Visitors are seen standing next to a logo of the Reserve Bank of India (RBI) at the bank's head office in Mumbai on December 5, 2018. (AFP)
Updated 12 December 2018
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India names Modi demonetization backer as cenbank head

  • Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization

MUMBAI: Ex-finance ministry official Shaktikanta Das took charge of the Reserve Bank of India on Tuesday, in a swift appointment expected to ease a dispute with the government as it pushes for looser credit rules ahead of a general election.
The announcement by Prime Minister Narendra Modi’s administration came just a day after Urjit Patel resigned from the post, following months of clashes between the two institutions over lending curbs and how to deploy the central bank’s surplus reserves.
Pressure on the RBI to take immediate steps to boost the economy, including a transfer of the excess reserves to the government, could well rise after Modi’s ruling Bharatiya Janata Party (BJP) suffered likely election losses in three key states on Tuesday.
Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization — will serve a three-year term as governor, effective immediately.
RBI watchers said they expected the 61-year-old, who retired last year as secretary of the department of economic affairs having previously served on the RBI’s board, to put relations between the Mumbai-based bank and the finance ministry in New Delhi on a stabler footing.
Investors will also look closely at his ability to hold up against outside influences after recent efforts by the Modi government to gain greater control over the central bank’s regulatory powers.
“The incoming governor will have to work hard to prove that he has his own independent mind,” said Deepak Jasani, head of retail research at Hdfc Securities.
Investors said any openly political appointee with little macro-economic experience, would not sit well with financial markets that already sold off following the BJP’s election setbacks.
But Ashish Vaidya, executive director and head of trading at DBS Bank in Mumbai, said he expected India’s debt and currency markets to react positively.
“He is a bureaucrat...We expect the RBI to take a pragmatic approach under him, be pro-growth and change its stance going ahead given that inflation has come off sharply,” he said.
Finance Minister Arun Jaitley told Reuters partner ANI that the government acknowledged the bank’s independence.
“Government will fully support the RBI and coordinate with it in areas where consultations of government are required to make sure India’s economy benefits from both government policy decisions and areas which fall within domain of the RBI,” ANI tweeted, quoting Jaitley.

SWIFT APPOINTMENT
Pronab Sen, India’s former chief statistician, said he was surprised by the speed of Das’s appointment.
“If you have a situation where a position as important as the governor of the RBI is filled within 24 hours of the resignation of the incumbent, that will raise eyebrows,” Sen told Reuters.
“People are going to say, clearly this guy had already been identified. And, the situation was created where Urjit Patel had to quit.”
Das — widely seen as a contender for the top RBI job after Raghuram Rajan’s term ended in 2016 — did not answer calls from Reuters to his mobile phone.
RBI officials who have worked with him closely said Das was likely to be more inclusive in the decision-making process than Patel.
“He has a balanced approach and is good at consensus building,” said a former deputy governor. .”..We have had our fair share of differences. But he has always been solution-centric rather than festering on those differences.”
Das worked in the finance ministry under both Modi’s government and the previous coalition led by the main opposition Congress party and was also involved in drafting the Insolvency and Bankruptcy code aimed at protecting small investors.
He came under fire for his pro-demonetization stance and was the most vocal bureaucrat at the time Modi withdrew the high-value bank notes to fight tax evasion.
Das last year criticized the methodology of global rating agencies and sought a sovereign rating upgrade for India.


Davos organizer WEF warns of growing risk of cyberattacks in Gulf

Updated 16 January 2019
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Davos organizer WEF warns of growing risk of cyberattacks in Gulf

  • Critical infrastructure such as power centers and water plants at particular risk, says expert
  • Report finds that unemployment is a major concern in Bahrain, Egypt, Morocco, Oman and Tunisia

LONDON: The World Economic Forum (WEF) has warned of the growing possibility of cyberattacks in the Gulf — with Saudi Arabia, the UAE and Qatar particularly vulnerable.

Cyberattacks were ranked as the second most important risk — after an “energy shock” — in the three Gulf states, according to the WEF’s flagship Global Risks Report 2019.

The report was released ahead of the WEF’s annual forum in Davos, Switzerland, which starts on Tuesday.

In an interview with Arab News, John Drzik, president of global risk and digital at professional services firm Marsh & McLennan said: “The risk of cyberattacks on critical infrastructure such as power centers and water plants is moving up the agenda in the Middle East, and in the Gulf in particular.”

Drzik was speaking on the sidelines of a London summit where WEF unveiled the report, which was compiled in partnership with Marsh and Zurich Insurance.

“Cyberattacks are a growing concern as the regional economy becomes more sophisticated,” he said.

“Critical infrastructure means centers where disablement could affect an entire society — for instance an attack on an electric grid.”

Countries needed to “upgrade to reflect the change in the cyber risk environment,” he added.

The WEF report incorporated the results of a survey taken from about 1,000 experts and decision makers.

The top three risks for the Middle East and Africa as a whole were found to be an energy price shock, unemployment or underemployment, and terrorist attacks.

Worries about an oil price shock were said to be particularly pronounced in countries where government spending was rising, said WEF. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to $88 a barrel, 26 percent above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80.

But that disclosure needed to be balanced with the fact that risk of “fiscal crises” dropped sharply in the WEF survey rankings, from first position last year to fifth in 2018.

The report said: “Oil prices increased substantially between our 2017 and 2018 surveys, from around $50 to $75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of 3 percentage points of GDP.”

At national level, this risk of “unemployment and underemployment” ranked highly in Bahrain, Egypt, Morocco, Oman and Tunisia.
“Unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: Youth unemployment averages around 25 percent and is close to 50 percent in Oman,” said the report.

Other countries attaching high prominence to domestic and regional fractures in the survey were Tunisia, with “profound
social instability” ranked first, and Algeria, where respondents ranked “failure of regional and global governance” first.

Looking at the global picture, WEF warned that weakened international co-operation was damaging the collective will to confront key issues such as climate change and environmental degradation.