My Internship Experience at Reserve Bank of India

Life was full of assignments, projects, presentations, surprise quizzes and I was eagerly waiting for some good news to have a short retreat from grinding life at IIM Kashipur. One fine day, moment to rejoice came in the form of internship offer from my dream organisation “The Reserve Bank of India”.  Congratulations all around with friends bashing me and parents were wishing all the best. But exhilaration subsided to half the levels as I was asked to report at the RBI Kanpur office rather than in Mumbai office. Being a south Indian, my Hindi speaking skills were very bad (better to say worst) and I had to spend 2 months in the core Hindi speaking belt of the country. However, joy of getting an offer from RBI allayed all the fears and scepticism.

After taking a week long refreshing break at home, I started on a 26 hour journey to Kanpur. I had to stay at my friend’s house for first two days as there was a bit of delay in allocation of quarter. First day of internship was an induction program where I was introduced to Regional Director, my mentor and some other officers, whom I had to work with. I was very excited after the first meeting with my mentor as he was very inspirational and work oriented. I always looked forward to interact with him. Other interns from IIM Lucknow, IIT Kanpur, IT-BHU and other colleges also joined soon and we slowly started moving together. Interns were given 2-bed room flats in RBI officers’ quarters which are located in a plush area in Kanpur. Adding to the comfortable stay, quarters were full of activity with children enjoying summer vacation in the calm and undisturbed surroundings often engaging us in cricket and badminton.

I was part of a team working on a live project to improve efficiency in government collection and payment systems. I had to conduct interviews of various stakeholders involved in the process. One of the interns from IIM Lucknow was also working on the same project. I enjoyed working with him and we shared views on various issues ranging from Currency system in India to Indian GDP. I got great amount of exposure in RBI as I participated in some central level discussions on monetary reviews, gold imports, currency fluctuations which included deputy governors of RBI and some other meetings which included heads of State Government departments and national banks to discuss progress on financial inclusion and issues with electronic funds. I got a clear idea of how regulator thinks and should think as decisions taken at regulatory level touch all lives.

Apart from the work, three things that I liked most were library, people and food. RBI’s library is a book lover’s paradise with books ranging from Indian culture to Indian currency in abundance. Employees (with average age of more than 50) were extremely proficient in banking knowledge and always guided us in our project. Hindi was never a problem in office as everyone could communicate in English and I also learnt a bit of Hindi (seriously not an exaggeration). I felt that employees in RBI feel proud of their work and organisation which was nowhere evident in software sector. Food in RBI was simply superb with around 12 different types of curries serving all palettes at the cheapest possible cost and lunch time was most awaited by one and all in RBI. Apart from these, never ending chats among interns at quarters, daily visit to rave-3 mall, a movie a week, outings to Varanasi, Allahabad, Lucknow, Agra and Mathura made my sojourn in Kanpur the most memorable.

Negotiating the vicious wheel of growth and inflation

Even before India has recovered from the economic slowdown of 2008, it is facing another serious issue of slowdown. I feel India is suffering a lot now compared to 2008. While lack of investor confidence and depreciation of rupee are major concerns, European slowdown is adding fuel to the fire. As a student of management, I will try to explain in this article Indian inflation and GDP and its direction in the short run in brief.

India is suffering from balance of payments crisis as capital account surplus is unable to compensate huge current deficit. In that way, India is a goods import oriented country with major sources of income in the recent times being services and remittances. Rupee has depreciated around 20% in the past one year with rupee being traded at 52.5-53 rupees/dollar in the foreign exchange market. RBI has not taken significant measures like selling foreign currencies, thus making it a clean floating price at least in the last one year. This may increase competitiveness of the Indian goods in the foreign markets. Export based industries like software are making the most of this situation. But at the same time, cost of importing goods like petrol, diesel and other technological products will increase. Increase in the prices of fuels will have huge impact on all the good prices which may further increase the inflation.

Indian inflation is hovering at double digit levels for the past year or so. Even though, it is showing signs of abatement, it is mainly because of high base price and slight reduction in the prices of food articles. Prices of mineral fuels and machinery are still increasing. Part of the increment is because of rupee depreciation as discussed. RBI has adopted contractionary monetary policy by increasing repo rate, reverse repo rate, CRR and thereby interest rates. Meanwhile GDP of last quarter and projections for 2012 are very meek with expected growth in GDP being 6-6.5%. High inflation is stopping government to go for expansionary monetary policies and thereby paving way for high growth in GDP.

Lack of policy implementations in the recent times (allowing FDI, Lokpal and others) and scams like 2G, CWG have lowered the investor confidence in the market. Lack of infrastructure development and slow adoption of technology may also be the reasons for lack of confidence. Experts say that inflation levels will come down to controlled levels by March and RBI policies will be reversed by the end of April. Quick implementation of policies and setting the correct ground for April will help increase the growth of GDP in the next fiscal year. U.S. is expected to resort to expansionary policy as elections are approaching and it will be good news to the entire world.  However lull in the economy and job market may continue till March 2013 due to the globalness of the issue.

India's Trade Deficit May Not Be Dangerous But Components Of It Are...

Problem Summary :-
    Currently India is running on a trade deficit(Imports - Exports) of around 100 Billion dollars. Literally speaking, India as a whole is eating 100 Billion dollar more than what it is producing(If I am not rude). This amount of trade deficit is nominal for a country of this size but the China's component of India's trade deficit(around 150 billion dollar) seems to be worrisome. That means India is giving China every year an amount of 150 billion dollars. Adding fuel to the fire, this component is widening year on year. This deficit is mainly because of the CHEAP electronic items that techno-savvy Indians are importing from China. On the other hand, China is decreasing its reliance on the outside world being the country with highest amount of trade surplus. China is imposing restrictions on some Indian products like steel which is causing further woes to India. This kind of situation where India is heavy reliant on China is not at all healthy and should not persist for longer period.

Current Situation :-
    India has been transforming from agricultural economy into a service based economy for the last few years. Dream of most of the fresh graduates is to land in a plush office where they are almost disconnected  with the outside realistic world. Cocentration on key sectors like electronics, high speed technology which is demand of the future is out of sight. But China's dependence on India is very less in service economy, which is our strength. This is the main reason of the widening trade deficit between India and China.

    In the process of more concentration on service sector, operational efficiencies of key sectors of India like supply chain management has taken a setback rather not improved and situation needs to be overhauled with utmost priority. Indian Supply chain management has become a separation between producer and consumer rather than facilitator. The news of 25% of the agriculture produce in India goes as a waste is not less than a surprise. Wastage can be attributed to the lack of quick transportation and cold storage facilities. Although political parties are boasting about so called development, there is room to develop alot in technical side. This is leading to lack of considerable exports in food products and thus unable to reduce gap.

Road ahead :-
    Indian government has to seriously consider the China's dominance of India. India is insisting China to import certain Indian products to reduce trade gap although China is resisting pressure. India has to invest heavily in electronics and other fields of technology. Special Economic Zones(SEZs), tax holidays on electronic goods manufacturing companies, special incentives to Indian manufactures can serve the purpose to a certain extent and will help smoothen the things in long run. At the same time, India should concentrate on developing effective agricultural and storage facilities which will facilitate the reduction in trade gap of India with the outside world in the short run.