Diesel

30
NIVESHAK
FinView
demand-side reasons that are affecting
the global oil prices? Does shale gas have
any role to play in this price debacle?
Can we expect that the positive impact
of reduced inflation will outweigh the
negative impact of reduced exports due
to weak global demand?
FinGyaan
There are multiple reasons for the decrease in
the price of crude. US has now become selfsufficient
in energy instead of being an importer.
This is because US government took a decision
to use domestic sources rather than depend
on imports. Withdrawal of US demand from
global markets has fueled reduction in price
of crude. Another reason is currency exchange
rates. Among the large developed economies,
US appears to be the only economy that is doing
well. It is growing at almost 3.5% while Europe
and Japan are stagnating and China is slowing
down. This has resulted in ‘flight to safety’
whereby savings from the rest of the world are
flowing to the US. As a result, the US dollar has
strengthened significantly (the US dollar index
has risen to over 86 against other currencies).
It has always been observed that strength of
US dollar and crude oil prices are negatively
correlated. This is so since crude prices are
quoted in USD. Strengthening of USD implies
higher prices in other currencies (for all other
buyers). To maintain prices in other currencies
so as to sustain demand, the producers are
therefore required to cut price of crude in dollar.
My assessment is that low crude prices may last
for some time, may be another 3-4 quarters. But
crude prices would rise after that above the
levels we are witnessing today. Such low prices
are not sustainable in the long term for the
producers. India being heavily dependent on oil
imports would benefit immensely from the low
crude prices. On balance, I think the benefits
from low crude prices out-weigh the negative
impact on exports from slowing global economy.
This is because India has a large domestic
economy.
no. 22 says, “Regulatory actions should
be subject to appeal to the Financial
Sector Appellate Tribunal, which will be
set up along the lines of, and subsume,
the Securities Appellate Tribunal.” The
recommendation asks for including even
RBI under the ambit of unified Tribunal
but in 2011 he opposed the same idea by
saying that the same recommendation
was ‘schizophrenic’ when Dr. Justice
BN Srikrishna recommended it in FSLRC
recommendations? What are your views?
No regulatory body, be it SEBI, or RBI or IRDA
would want to subject itself to monitoring. It
is therefore not surprising that the view of RBI
governor changed (if it indeed did as quoted
in your question). There is need for an agency
(other than courts of law) to hear appeals against
the primary regulators’ decisions. If the legal
system were more efficient then courts could
have played this role. Unlike SEBI’s decisions
that can be appealed against to SAT, there is
no agency that can be approached against
decisions of RBI. I think such a body is needed
to deal with regulatory excesses and regulatory
over-reach. Else, there could be an element of
recklessness in the decisions of regulators.
In 2007 a high level committee on financial
sector reforms was constituted under
the chairmanship of Dr. Rajan. Proposal
NOVEMBER 2014