Rising inflationary pressures and a weakening currency have crushed India exchange traded funds this year, but investors are coming back, betting on India’s new central bank leadership.
Raghuram Rajan, former chief economist of the International Monetary Fund, took over the Reserve Bank of India, the Associated Press reports. Rajan has announced he will implement short-term changes.
“It involves considerable change, and change is risky,” Rajan said in the article. “But as India develops, not changing is even riskier.”
Specifically, Rajan stated that existing banks would be able to open new domestic branches without RBI go-ahead and that new banking licenses would be issued by January. The RBI will also issue inflation-indexed savings certificates and encourage low-income financial services. Additionally, he promised to improve bad loan recovery.
“Some of the actions I take will not be popular,” Rajan added. “The governorship of the central bank is not meant to win one votes of Facebook ‘likes.'”
India’s economy slowed to 4.4% growth in the second quarter. The Indian rupee has depreciated 20% since May. The WisdomTree Indian Rupee Fund (NYSEArca: ICN)is down 14.5% year-to-date. [India ETFs on Shaky Footing with Weakening Rupee]