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Rajan exit impact eased by new FDI rules

Monday, June 20, 2016 - 01:42

Apple could open its first stores in India under new foreign investment rules for retailers outlined on Monday. As Hayley Platt reports, the reforms boosted markets hit by news the central bank governor would not seek a second term.

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He's the central bank governor with rock star credentials. India's Raghuram Rajan has won praise from the media and others for his sure-footed handling of the country's worst currency crisis in more than two decades. But Rajan surprised markets at the weekend by announcing he won't stay on after his contract ends in September. (SOUNDBITE)(English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "I think in terms of institutional investors there will be a degree of uncertainty and of course uncertainty is normally met with investors retreating to the sidelines." Rajan's policy for keeping interest rates high had reportedly upset some inside the government, including President Modi. According to one newspaper, other candidates were being considered for the role . Effectively forcing Rajan to reapply for his own job. Some now fear the clean-up of India's debt-laden banks may not be pursued so aggressively, although with China's slowdown there is an opportunity for India. (SOUNDBITE)(English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "There are huge degrees of latent potential. I think the problem has always been the ability to tap that potential and I think structural reforms are hugely important." There are signs that's happening - India has also announced changes to foreign direct investment. That helped stocks reverse their initial shock at Rajan's decision. Under the new rules its defence and civil aviation sectors will be able to compete with the rest of the world. And restrictions on inbound investments in pharmaceuticals and retail will be loosened. That's good news for the likes of Apple and Ikea - both will be able to open stores in one the world's fastest growing economies.

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Rajan exit impact eased by new FDI rules

Monday, June 20, 2016 - 01:42