Latest news with #RaghuramRajan
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Business Standard
3 hours ago
- Business
- Business Standard
Rate cuts by RBI not magic bullet to propel investments: Raghuram Rajan
Former RBI Governor Raghuram Rajan has said repo rate cuts by the Reserve Bank in recent times are not a "magic bullet" that will necessarily propel investments, as several other factors play a part in boosting the economy. Rajan further said interest rates, at this point, are not overly high and the impact of rate cuts announced by the RBI will take time to play out. "And as you correctly point out, (high) interest rates were an argument (earlier), but I do not think that can any longer be an argument. "I do not think that necessarily this (rate cuts by RBI) will be a magic bullet to propel investments," Rajan told PTI Videos. On June 6, RBI Governor Sanjay Malhotra-headed six-member monetary policy committee reduced the benchmark short-term lending rate by 50 basis points, taking the total reduction to 100 bps in quick succession, besides a change in the policy stance to neutral from accommodative and liquidity infusion measures. Rajan was asked whether repo rate cuts announced by the RBI in recent times will finally nudge corporates to increase their investment plans. The eminent economist said: "Some of the other factors, including creating more of a transparent sort of playing field and creating more competition in a number of sectors, will urge industry to be less complacent and more focused on investing to preserve their advantage and their lead". "So, I do not think it is just interest rates. I think it is a combination of I hope that more corporate investment is forthcoming." He said that Indian industries have not seemed to be investing after the massive investment expansion before the global financial crisis. "They (Indian industries) have become much more circumspect, and they can not keep saying this is the condition of the domestic economy -- earlier, they were saying the lower middle class is not spending, rural areas are not spending. "Now it is flipped over. It is the upper middle class which is not spending," Rajan, currently a professor of finance at Chicago Booth, said. Recent data from the Ministry of Statistics indicated that the share of private sector investment in India has dropped to 11-year lows. "And as you correctly point out, interest rates were an argument, but I do not think that can any longer be an argument," he said. In FY24, the private sector's share in gross fixed capital formation (GFCF) -- a key measure of investment in physical assets -- dropped to 32.4 per cent. Asked if there is any room for the RBI for further rate cuts as CPI inflation has fallen to 2.1 per cent in June, Rajan said he does not like to comment on the central bank's policy. "Let me just say that we are in a very comfortable situation as far as inflation goes, and to some extent, the tariffs on imports in industrial countries, which may sort of propagate from the US to other countries, tend to be disinflationary for countries that export," he said. Rajan said he would not pay as much attention to headline inflation, even though the headline inflation is what the RBI is targeting. "But I would also take a look at core inflation at such times, just to satisfy myself that the disinflationary impulse is across the board. "And if you look at core inflation, it is somewhat higher than the headline number," he noted. CPI headline inflation was 2.10 per cent in June 2025, and it is the lowest year-on-year inflation after January 2019. Crude oil prices are currently under control. Food inflation in June 2025 was -1.06 per cent. Assuming a normal monsoon, the RBI projected inflation at 3.7 per cent for FY26. While pointing out that core inflation is at a comfortable level, Rajan said, "Interest rates are not at this point overly high after the rate cuts that RBI has made, and we will have to wait for some more time to see how things play out". Responding to a question on surge in net outward foreign direct investment (FDI), he said FDI is complicated. "It is not just people putting sort of money on the ground in greenfield projects." "Sometimes you know what they take out in terms of dividends, etc, counts negatively on FDI I do worry that. "Given the sort of push in a number of firms for an alternative to China plus one strategy, we should be getting much more of that kind of FDI," he said. And of course, Rajan said India should be getting FDI, which seeks to find a place with good logistics but reasonable workers, much like some of the southern states are attracting that kind of FDI.
Economic Times
3 hours ago
- Business
- Economic Times
Raghuram Rajan says rate cuts by RBI not magic bullet to propel investments
Former RBI Governor Raghuram Rajan. Former RBI Governor Raghuram Rajan has said repo rate cuts by the Reserve Bank in recent times are not a "magic bullet" that will necessarily propel investments, as several other factors play a part in boosting the further said interest rates, at this point, are not overly high and the impact of rate cuts announced by the RBI will take time to play out."And as you correctly point out, (high) interest rates were an argument (earlier), but I do not think that can any longer be an argument."I do not think that necessarily this (rate cuts by RBI) will be a magic bullet to propel investments," Rajan told PTI June 6, RBI Governor Sanjay Malhotra-headed six-member monetary policy committee reduced the benchmark short-term lending rate by 50 basis points, taking the total reduction to 100 bps in quick succession, besides a change in the policy stance to neutral from accommodative and liquidity infusion measures. Rajan was asked whether repo rate cuts announced by the RBI in recent times will finally nudge corporates to increase their investment eminent economist said: "Some of the other factors, including creating more of a transparent sort of playing field and creating more competition in a number of sectors, will urge industry to be less complacent and more focused on investing to preserve their advantage and their lead"."So, I do not think it is just interest rates. I think it is a combination of I hope that more corporate investment is forthcoming." He said that Indian industries have not seemed to be investing after the massive investment expansion before the global financial crisis."They (Indian industries) have become much more circumspect, and they can not keep saying this is the condition of the domestic economy -- earlier, they were saying the lower middle class is not spending, rural areas are not spending."Now it is flipped over. It is the upper middle class which is not spending," Rajan, currently a professor of finance at Chicago Booth, said. Recent data from the Ministry of Statistics indicated that the share of private sector investment in India has dropped to 11-year lows. "And as you correctly point out, interest rates were an argument, but I do not think that can any longer be an argument," he FY24, the private sector's share in gross fixed capital formation (GFCF) -- a key measure of investment in physical assets -- dropped to 32.4 per if there is any room for the RBI for further rate cuts as CPI inflation has fallen to 2.1 per cent in June, Rajan said he does not like to comment on the central bank's policy."Let me just say that we are in a very comfortable situation as far as inflation goes, and to some extent, the tariffs on imports in industrial countries, which may sort of propagate from the US to other countries, tend to be disinflationary for countries that export," he said he would not pay as much attention to headline inflation, even though the headline inflation is what the RBI is targeting."But I would also take a look at core inflation at such times, just to satisfy myself that the disinflationary impulse is across the board."And if you look at core inflation, it is somewhat higher than the headline number," he headline inflation was 2.10 per cent in June 2025, and it is the lowest year-on-year inflation after January 2019. Crude oil prices are currently under inflation in June 2025 was -1.06 per cent. Assuming a normal monsoon, the RBI projected inflation at 3.7 per cent for pointing out that core inflation is at a comfortable level, Rajan said, "Interest rates are not at this point overly high after the rate cuts that RBI has made, and we will have to wait for some more time to see how things play out". Responding to a question on surge in net outward foreign direct investment (FDI), he said FDI is complicated. "It is not just people putting sort of money on the ground in greenfield projects." "Sometimes you know what they take out in terms of dividends, etc, counts negatively on FDI I do worry that."Given the sort of push in a number of firms for an alternative to China plus one strategy, we should be getting much more of that kind of FDI," he said. And of course, Rajan said India should be getting FDI, which seeks to find a place with good logistics but reasonable workers, much like some of the southern states are attracting that kind of FDI. PTI
Time of India
4 hours ago
- Business
- Time of India
Raghuram Rajan says rate cuts by RBI not magic bullet to propel investments
Former RBI Governor Raghuram Rajan has said repo rate cuts by the Reserve Bank in recent times are not a "magic bullet" that will necessarily propel investments, as several other factors play a part in boosting the economy. Rajan further said interest rates, at this point, are not overly high and the impact of rate cuts announced by the RBI will take time to play out. Explore courses from Top Institutes in Select a Course Category Artificial Intelligence Data Science Technology Degree Leadership Digital Marketing Design Thinking Others Public Policy Data Analytics Management PGDM Data Science Project Management MCA Cybersecurity Product Management Finance others healthcare CXO Operations Management Healthcare MBA Skills you'll gain: Duration: 7 Months S P Jain Institute of Management and Research CERT-SPJIMR Exec Cert Prog in AI for Biz India Starts on undefined Get Details "And as you correctly point out, (high) interest rates were an argument (earlier), but I do not think that can any longer be an argument. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Victoria Principal Is Almost 75, See Her Now Reportingly Undo "I do not think that necessarily this (rate cuts by RBI) will be a magic bullet to propel investments," Rajan told PTI Videos. On June 6, RBI Governor Sanjay Malhotra-headed six-member monetary policy committee reduced the benchmark short-term lending rate by 50 basis points, taking the total reduction to 100 bps in quick succession, besides a change in the policy stance to neutral from accommodative and liquidity infusion measures. Live Events Rajan was asked whether repo rate cuts announced by the RBI in recent times will finally nudge corporates to increase their investment plans. The eminent economist said: "Some of the other factors, including creating more of a transparent sort of playing field and creating more competition in a number of sectors, will urge industry to be less complacent and more focused on investing to preserve their advantage and their lead". "So, I do not think it is just interest rates. I think it is a combination of I hope that more corporate investment is forthcoming." He said that Indian industries have not seemed to be investing after the massive investment expansion before the global financial crisis. "They (Indian industries) have become much more circumspect, and they can not keep saying this is the condition of the domestic economy -- earlier, they were saying the lower middle class is not spending, rural areas are not spending. "Now it is flipped over. It is the upper middle class which is not spending," Rajan, currently a professor of finance at Chicago Booth, said. Recent data from the Ministry of Statistics indicated that the share of private sector investment in India has dropped to 11-year lows. "And as you correctly point out, interest rates were an argument, but I do not think that can any longer be an argument," he said. In FY24, the private sector's share in gross fixed capital formation (GFCF) -- a key measure of investment in physical assets -- dropped to 32.4 per cent. Asked if there is any room for the RBI for further rate cuts as CPI inflation has fallen to 2.1 per cent in June, Rajan said he does not like to comment on the central bank's policy. "Let me just say that we are in a very comfortable situation as far as inflation goes, and to some extent, the tariffs on imports in industrial countries, which may sort of propagate from the US to other countries, tend to be disinflationary for countries that export," he said. Rajan said he would not pay as much attention to headline inflation, even though the headline inflation is what the RBI is targeting. "But I would also take a look at core inflation at such times, just to satisfy myself that the disinflationary impulse is across the board. "And if you look at core inflation, it is somewhat higher than the headline number," he noted. CPI headline inflation was 2.10 per cent in June 2025, and it is the lowest year-on-year inflation after January 2019. Crude oil prices are currently under control. Food inflation in June 2025 was -1.06 per cent. Assuming a normal monsoon, the RBI projected inflation at 3.7 per cent for FY26. While pointing out that core inflation is at a comfortable level, Rajan said, "Interest rates are not at this point overly high after the rate cuts that RBI has made, and we will have to wait for some more time to see how things play out". Responding to a question on surge in net outward foreign direct investment (FDI), he said FDI is complicated. "It is not just people putting sort of money on the ground in greenfield projects." "Sometimes you know what they take out in terms of dividends, etc, counts negatively on FDI I do worry that. "Given the sort of push in a number of firms for an alternative to China plus one strategy, we should be getting much more of that kind of FDI," he said. And of course, Rajan said India should be getting FDI, which seeks to find a place with good logistics but reasonable workers, much like some of the southern states are attracting that kind of FDI. PTI
News18
4 hours ago
- Business
- News18
Rate cuts by RBI not magic bullet to propel investments: Raghuram Rajan
New Delhi, Jul 21 (PTI) Former RBI Governor Raghuram Rajan has said repo rate cuts by the Reserve Bank in recent times are not a 'magic bullet" that will necessarily propel investments, as several other factors play a part in boosting the economy. Rajan further said interest rates, at this point, are not overly high and the impact of rate cuts announced by the RBI will take time to play out. 'And as you correctly point out, (high) interest rates were an argument (earlier), but I do not think that can any longer be an argument. 'I do not think that necessarily this (rate cuts by RBI) will be a magic bullet to propel investments," Rajan told PTI Videos. On June 6, RBI Governor Sanjay Malhotra-headed six-member monetary policy committee reduced the benchmark short-term lending rate by 50 basis points, taking the total reduction to 100 bps in quick succession, besides a change in the policy stance to neutral from accommodative and liquidity infusion measures. Rajan was asked whether repo rate cuts announced by the RBI in recent times will finally nudge corporates to increase their investment plans. The eminent economist said: 'Some of the other factors, including creating more of a transparent sort of playing field and creating more competition in a number of sectors, will urge industry to be less complacent and more focused on investing to preserve their advantage and their lead". 'So, I do not think it is just interest rates. I think it is a combination of factors…But I hope that more corporate investment is forthcoming." He said that Indian industries have not seemed to be investing after the massive investment expansion before the global financial crisis. 'They (Indian industries) have become much more circumspect, and they can not keep saying this is the condition of the domestic economy — earlier, they were saying the lower middle class is not spending, rural areas are not spending. 'Now it is flipped over. It is the upper middle class which is not spending," Rajan, currently a professor of finance at Chicago Booth, said. Recent data from the Ministry of Statistics indicated that the share of private sector investment in India has dropped to 11-year lows. 'And as you correctly point out, interest rates were an argument, but I do not think that can any longer be an argument," he said. In FY24, the private sector's share in gross fixed capital formation (GFCF) — a key measure of investment in physical assets — dropped to 32.4 per cent. Asked if there is any room for the RBI for further rate cuts as CPI inflation has fallen to 2.1 per cent in June, Rajan said he does not like to comment on the central bank's policy. 'Let me just say that we are in a very comfortable situation as far as inflation goes, and to some extent, the tariffs on imports in industrial countries, which may sort of propagate from the US to other countries, tend to be disinflationary for countries that export," he said. Rajan said he would not pay as much attention to headline inflation, even though the headline inflation is what the RBI is targeting. 'But I would also take a look at core inflation at such times, just to satisfy myself that the disinflationary impulse is across the board. 'And if you look at core inflation, it is somewhat higher than the headline number," he noted. CPI headline inflation was 2.10 per cent in June 2025, and it is the lowest year-on-year inflation after January 2019. Crude oil prices are currently under control. Food inflation in June 2025 was -1.06 per cent. Assuming a normal monsoon, the RBI projected inflation at 3.7 per cent for FY26. While pointing out that core inflation is at a comfortable level, Rajan said, 'Interest rates are not at this point overly high after the rate cuts that RBI has made, and we will have to wait for some more time to see how things play out". Responding to a question on surge in net outward foreign direct investment (FDI), he said FDI is complicated. 'It is not just people putting sort of money on the ground in greenfield projects." 'Sometimes you know what they take out in terms of dividends, etc, counts negatively on FDI I do worry that. 'Given the sort of push in a number of firms for an alternative to China plus one strategy, we should be getting much more of that kind of FDI," he said. And of course, Rajan said India should be getting FDI, which seeks to find a place with good logistics but reasonable workers, much like some of the southern states are attracting that kind of FDI. PTI BKS BKS BAL BAL (This story has not been edited by News18 staff and is published from a syndicated news agency feed - PTI) view comments First Published: Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
News18
8 hours ago
- Business
- News18
How India's Homegrown UPI Became The World's Top Real-Time Payments System
With over 640 million transactions a day, India's UPI has now overtaken Visa in volume. In June 2025, it recorded 18.39 billion transactions worth Rs 24 lakh crore India's Unified Payments Interface (UPI), launched less than a decade ago, has now become the world's most used real-time payment system. In its July 2025 report titled Growing Retail Digital Payments: The Value of Interoperability, the International Monetary Fund (IMF) revealed that UPI now powers 85 per cent of India's digital payments and nearly 60 per cent of global real-time digital transactions. UPI is processing over 640 million transactions every day, surpassing global giant Visa, which sees about 639 million daily. In June 2025, UPI recorded 18.39 billion transactions worth Rs 24 lakh crore, marking a 32 per cent year-on-year jump compared to June 2024. So, what's the story behind this fintech phenomenon? How did a public digital infrastructure, created by a government-backed body, beat multinational corporations at their own game? Here's a deep dive into the rise of UPI. What Is UPI And How Does It Work? Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI) and made available to the public in August 2016. Built atop the Immediate Payment Service (IMPS) infrastructure, UPI allows users to link multiple bank accounts into one mobile app, enabling instant fund transfers, peer-to-peer payments, merchant transactions, and even recurring bill payments. Unlike traditional card-based systems that involve intermediaries and longer settlement periods, UPI facilitates instant and direct bank-to-bank transactions, 24×7, including holidays. The key innovation lies in interoperability. UPI is not restricted to a particular bank or app. Whether using Google Pay, PhonePe, Paytm, BHIM, or any other UPI-enabled application, users can transfer money across platforms without friction. The Genesis: Why Was UPI Launched? The seeds of UPI were sown in the years following India's push for financial inclusion and digitisation. NPCI, a not-for-profit umbrella body promoted by the Reserve Bank of India and Indian Banks' Association, had already rolled out the IMPS system and RuPay cards. But a need was felt for a more scalable, flexible, and user-friendly payment system that could integrate multiple services into a single interface. The real push came post-2014, as the Digital India mission gained momentum and the Pradhan Mantri Jan Dhan Yojana (PMJDY) brought millions of Indians into the formal banking system. UPI emerged as the ideal next step to connect those bank accounts to a seamless digital payment ecosystem. Former RBI Governor Raghuram Rajan, who was at the helm when UPI was conceptualised, had called it a 'revolution" for retail payments in India. Speaking at an event in 2016, he said, 'The country has the most sophisticated public payment infrastructure in the world, which can be accessible to anyone who enters the system." Pandemic Push And The UPI Boom While UPI was gaining steady traction in its early years, the Covid-19 pandemic acted as a major catalyst. With physical distancing, lockdowns, and a sudden aversion to cash handling, digital payments skyrocketed. UPI saw exponential growth between 2020 and 2022, reaching over 6 billion monthly transactions by late 2022. With zero cost to users, wide availability across urban and rural India, and support in multiple languages, UPI became the go-to for both consumers and small businesses. The government's push to promote QR code-based payments, especially through schemes like PM SVANidhi for street vendors, also brought millions of informal economy participants into the fold. By 2023, UPI had outpaced debit and credit card transactions in both volume and value, according to Reserve Bank of India's Annual Report. The Numbers: UPI's Record-Breaking Growth As of June 2025: UPI powers over 85 per cent of India's digital retail payments, and it is now accepted by over 500 million users. The NPCI's vision of open architecture and standardised APIs (Application Programming Interfaces) has allowed private players like PhonePe and Google Pay to thrive while keeping the underlying system neutral and publicly governed. Why UPI Succeeded Where Others Struggled Interoperability and Open Access The IMF report highlights interoperability as a key driver behind UPI's growth, noting that it 'supports the adoption of digital payments by increasing users' freedom to choose their favourite app" and fosters an ecosystem where 'more providers join and improve, offering better features and security" UPI's meteoric rise was also driven by its zero-cost structure. Since January 2020, the Indian government has enforced a no Merchant Discount Rate (MDR) policy on UPI transactions, meaning merchants are not charged any fees, even for small-value or high-volume payments. The Finance Ministry has repeatedly clarified that there is no plan to impose MDR, calling reports to the contrary 'completely baseless and misleading". With no charges for consumers and no burden on merchants, UPI emerged as the most economical way to transact digitally across income levels and geographies. Its intuitive, multilingual user interfaces further helped it penetrate rural areas, tier-2 and tier-3 towns, and digitally underserved communities. Combined with low data usage, rapid onboarding via Aadhaar-linked bank accounts, and government-supported promotion drives, UPI's frictionless design made it the default payment mode for everything from street vendors to supermarkets. Strong Regulatory Backing Beyond cost advantages and interoperability, UPI's expansion has been actively enabled by targeted government schemes and RBI-led mandates aimed at reaching the informal and underserved segments of the economy. One key intervention was the PM SVANidhi scheme, launched in June 2020, which offers financial incentives to street vendors who adopt digital payments. By linking cashback rewards to UPI transactions, the scheme helped digitise payments in India's vast informal sector. The Reserve Bank of India has also pushed for UPI's integration into feature phones through services like UPI 123Pay, allowing users without smartphones or internet access to make digital transactions using IVR and missed call systems. These innovations have expanded UPI's reach beyond urban centres. Such regulatory and policy measures, focused on inclusion, infrastructure, and behavioural nudges, have ensured UPI's adoption across a wide spectrum of India's population. UPI Goes Global: From Singapore To France UPI's success story isn't confined to India's borders. According to the IMF report, UPI is now live in seven countries: United Arab Emirates Singapore Bhutan Nepal Sri Lanka France Mauritius Its entry into France is particularly notable; it marks UPI's first step into Europe. Tourists and Indian expats can now make payments using Indian bank accounts in outlets accepting UPI, bypassing the need for currency exchange or international cards. The NPCI, via its international arm NPCI International Payments Ltd (NIPL), has been proactively signing agreements with foreign governments and payment gateways. The UAE's Mashreq Bank and Singapore's PayNow are among the first partners. What Lies Ahead for UPI? BRICS Standardisation Drive India is actively advocating for UPI to be recognised as a standard payments platform within BRICS, which recently expanded to include six new member nations. This initiative is part of the broader BRICS Pay agenda aimed at establishing a shared digital payments system. If successful, the move could: Lower costs of remittances across member countries Enable seamless cross-border merchant transactions Elevate India's global fintech influence UPI–e‑Rupee Integration The Reserve Bank of India is integrating UPI with the e‑Rupee (India's retail Central Bank Digital Currency), which began its pilot in December 2022. Currently, users can: Scan UPI QR codes using e‑Rupee wallets for P2P and P2M transactions, settled via the UPI backend Leverage the existing UPI infrastructure to scale e‑Rupee usage—the RBI aims to increase daily CBDC transactions from around 10,000 to 1 million The strategy combines UPI's unparalleled convenience with CBDC's programmability and traceability, potentially creating a sophisticated and inclusive digital money ecosystem. Final Word top videos View all In just nine years, UPI has achieved what many multibillion-dollar payment giants couldn't in decades—creating a unified, inclusive, and globally scalable real-time payments network. With backing from the government, trust from users, and recognition from global institutions, UPI's journey from an Indian innovation to an international benchmark is nothing short of revolutionary. About the Author Karishma Jain Karishma Jain, Chief Sub Editor at writes and edits opinion pieces on a variety of subjects, including Indian politics and policy, culture and the arts, technology and social change. Follow her @ More Get Latest Updates on Movies, Breaking News On India, World, Live Cricket Scores, And Stock Market Updates. Also Download the News18 App to stay updated! tags : digital banking Financial Inclusion imf Unified Payments Interface view comments Location : New Delhi, India, India First Published: July 21, 2025, 14:33 IST News explainers How India's Homegrown UPI Became The World's Top Real-Time Payments System Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
