Highlights of RBI Governor Reddy's speech in US

[K.Karthik Raja]

Highlights of RBI Governor Reddy's speech in US
Tuesday, Apr 15

MUMBAI - Reserve Bank of India Governor Y.V. Reddy said Monday
that while
there was a case for setting up sovereign wealth funds to invest
foreign
exchange reserves in high yielding assets, it was difficult to fathom
such a
possibility in the Indian context.
Speaking on sovereign wealth funds in the U.S., Reddy said
"adequacy" of
reserves in milieu of dynamic shifts in the reserves and varying
liquidity
risks of inflows into a country, make it difficult for having a
separate Fund.
Reddy also said:
.
* Possible to argue a case for sovereign wealth fund.
* Difficult to reckon sovereign funds in Indian context.
* RBI emphasis on safety constrains returns from FX reserves.
* RBI watching PE, hedge funds development for transparency.
* RBI watching development of global code of sovereign funds.
* India's current account deficit is manageable.
* FX reserve management reflects liquidity risk on inflow change.
* FX reserve rise reflect economy's low absorptive ability.
* FX absorption ability to rise as econ moves to high growth path.
* Investment position negative as liabilities exceed assets.
End