Rajan's assessment of Brexit impact on India: Don’t panic, we are well-placed

Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said that the panic over Brexit was a bit exaggerated and it would not impact the rupee as much as being feared widely.

Catch all the views, news and reaction on Britain's EU referendum here

Appealing to investors to remain calm, Rajan said: “I am not sure if there would be a dramatic correction in the rupee. Overtime the domestic currency has depreciated in consonance with interest differential over the world. The rupee movement today is moderate compared with other markets,” he said.

Talking to ET Now, he said the swings in India’s bond market will be far less than its peers.





Rajan said the Brexit vote would have a number of repercussions for financial markets and for the political fabric of the EU. “But we see no immediate dire impact on Britain,” he said.

“Brexit has ramification around the world. If it signifies an attitude towards free trade and immigration, then there is a lot to worry about,” he said.

“Central banks across the world had been looking at the possibility of a Brexit and at RBI, we had prepared for all eventuality,” he said.

Rajan said the immediate consequence for Britain would be that investment would slow down further, and the Bank of England has already said it would have consequences on the currency. “Nothing will happen immediately, things will unravel going ahead.”

Reacting to the wild reaction in financial markets, he said: “This an adjustment, which is factoring in the short-term and long-term consequences.”

RBI said he did not expect substantial outflows from India as of now. “The rupee movement today is moderate compared with other currencies. We will intervene in the currency markets when necessary,” he said.

The RBI governor said RBI was watching all global and domestic markets carefully and would provide liquidity to cushion the Brexit impact. “The rupee has been more stable compared with other emerging market currencies. We are by no means an outlier,” he said. “Where liquidity is needed, we will provide liquidity whether domestically or internationally.””

Rajan said the RBI would remain accommodative even in the post-Brexit scenario and the government steps would help maintain stability in the macro-fundamentals.

Also read: Get news, views and all the updates about Brexit here