Poll Stakes Behind India Central-Bank Row: EM Insight

The video discusses the sell-off of the Indian rupee, highlighting the standoff between the Reserve Bank of India and the government. The central bank's autonomy is under pressure due to fiscal challenges and bad loans in the banking system. The government seeks to use central bank reserves to address fiscal deficits, especially in an election year. Potential outcomes include central bank resignations or government backing off to maintain international reputation. India's debt is not heavily encumbered, but oil prices and inflation pose risks. The market is expected to remain volatile until the 2019 elections.

What is one of the main reasons for the tension between the Indian government and the Reserve Bank of India?

• The government's plan to privatize public banks

• The government's demand for funds from the RBI's reserves

• The RBI's insistence on increasing foreign investments

• The RBI's refusal to lower interest rates

What is a potential consequence if the Indian government continues to pressure the Reserve Bank of India?

• The RBI might close several banks

• The government might reduce taxes

• The RBI governor might resign

• The RBI might increase interest rates

How has India managed its foreign debt situation over the past 20 years?

• By privatizing state-owned enterprises

• By increasing foreign investments

• By avoiding short-term foreign currency borrowing

• By borrowing heavily in foreign currency

What is a key risk for the Indian economy as mentioned in the transcript?

• High oil prices

• Low foreign investments

• Decreasing population

• Rising unemployment

What is the outlook for the Indian economy leading up to the elections?

• Improving steadily

• Declining rapidly

• Volatile and uncertain

• Stable and growing