Don\'t expect to see fullfledged currency war: C Rangarajan

Dr C Rangarajan, chairman of Prime Minister's Economic Advisory Council and former governor of RBI, to discuss the issue.

 Below is a verbatim transcript of the interview. Also watch the video.

Q: With regards to the external environment, what several people are calling the potential of a currency war breaking down or breaking out?a race to the bottom?how de-stabilising do you anticipate this could be to the global growth situation and what implications could it have for India?

A: If that is all-out currency war, it will be very damaging to the world economy. The growth process, which is still very slow in the developed economies, will be severely affected and it will also affect the developing economies. But one only hopes that it will not blow into or emerge into a full scale currency war.

Q: This is going to be the focus of talks in the upcoming G20 meet. The US-China debate aside several emerging nations have either imposed some form of capital control or are considering some form of capital control. You had what is going on in Brazil and Thailand?analysts are expecting Taiwan, Korea and maybe even Indonesia to start looking at some for of capital controls. How do you assess the chances of a currency war breaking out? Of course it breaks out like you pointed out, it would be disastrous, but what are the chances currently in your assessment of such a thing happening?

A: I think some compromise will be worked out the G20 meetings. Neither United States not China would be interested in pushing this to the brink. I don?t particularly think that the possibility of a full-fledged currency war bursting on the world economy. As far as capital controls are concerned, that is based on a different set of consideration the emerging markets feel that possibly because of the liquidity available in the world system. There will be more influx of funds into the countries and they are keen and anxious to limit these inflows or to ensure that the impact of these inflows is not too much on the economy.

Q: Coming to India view and starting first with the rupee as well as the intervention issue before going into the capital control?s point of view. We have seen about 5% appreciation on the rupee this year. It?s at mid-44 levels. We have seen one bought of interventions by the RBI last week. What rupee level are you building into your assessment? Where do you think the exchange rate is likely to go and settle, over the short-term at least, considering that the flood of liquidity coming in from some of the developed nations is unlikely to be stemmed in any fashion?

A: As far as the appreciation of the rupee is concerned, it is very much in relation to the dollar. In relation to the other currencies, it has been a zigzag. It is not in any one direction. On the whole, the trade deficit has a tendency to widen and therefore in this particular context we need to ensure that the rupee in terms of the dollar does not appreciate in nominal terms. Perhaps we should say more or less at the same level that we had at the beginning of the fiscal year. Therefore the first step is to ensure that the rupee does not appreciate in nominal terms.

In real effective terms of course the rupee has appreciated. That is precisely because of the high level of inflation in this country. Only when inflation in India comes down very substantially, the real effective appreciation can be stopped. But in nominal terms, I would suggest that the RBI should take such action as will be necessary to ensure that it doesn?t appreciate.

Q: What is that such action? Is it more direct intervention that you are referring to?

A: Yes, if the capital inflows are very large, then the Reserve Bank of India (RBI) should be willing to intervene in the market and accumulate the reserves. But let us also understand that until the end of August the capital inflow into India was not that strong. The addition to the foreign exchange reserves at end of August was very minimal. The surge is seen only in September and in October.

But also let us look at the capital inflows in the context of widening current account deficit perhaps the current account deficit of India in this year will be close to 3% of the GDP. This will be equivalent to something like USD 45 billion and therefore we need capital inflows to finance the current account deficit of that particular order and some addition to the foreign exchange reserves over and above covering the current account deficit will also be needed.

There is still some scope for the Reserve Bank of India to absorb the capital flows into the reserves.

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Expect to end FY12 with 40,000 MW capacity: NTPC

State-owned power generating company NTPC?s execution roadmap is on track, says the recently appointed chairman and managing director Arup Roy Choudhury, in an exclusive interview

He says a wave of external factors affected their delivery in the past but is expecting to meet their annual targets this time around. At present, their execution capacity is at 32,000 megawatt. He says, they will end FY11 with an additional 4,000 megawatt and end FY12 with another 5,000 megawatt taking their total capacity to 40,000 megawatt. ?We are going to achieve 75,000 megawatt in the next five years,? he added.

Below is a verbatim transcript. Also watch the accompanying videos.

Q: Could you take us through the execution roadmap for NTPC over the next two-three years as you see it? Over the last three years, one observation has been that NTPC has not achieved plant capacity addition?

A: This year we had a target to achieve an additional 4,000 megawatt and we are on line to achieve that. From next year onwards it is going to be 5,500-6,000 megawatt increase in that order. Today our total capacity is generating about 30,000-32,000 megawatt and 18,000 megawatt is already under construction. So it is about 50,000.

We are targeted to do about 75,000 megawatt by the end of 12th plan for which you will be happy to know that another 8,000-9,000 megawatt is under the tendering process. Another 13,000 megawatt of the feasibility report (FR) has been approved which will take us to about 70,000 megawatt. We are in a position to get another FR approval of another 10,000-15,000 megawatt by end of this year. If we achieve all this, I don?t see any reason why NTPC should miss any of its targets.

Q: Those numbers look good. The only thing is that the recent track record does not inspire too much confidence because NTPC spoke about 2,800 megawatt in FY09, but achieved 1,000 megawatt. In FY10, it spoke about 3,300 megawatt, again achieved roughly 1,000 megawatt. Why this underachievement over the last couple of years which would make your investors slightly skeptical of this 4,000 megawatt target that you are talking about for this year?

A: To the investors, I would request them to wait for October 26 when our quarterly results are going to be announced. The 4,000 megawatt that we have targeted, most of the projects are online and some of the issues where there were probably certain failures, totally they are not attributed to NTPC because we are working in a total environment where there are many players who affect our delivery.

I can assure the investors we have discussed it in-house, had a detailed discussion with the directors, the regional executive directors and the general managers of the projects and we feel that we can now do a little differently than what we were doing before. We have put all our vendors and sub-vendors on a caution note.

Q: Just to reiterate those numbers, by the end of fiscal year 2011 and by the end of fiscal year 2012, what kind of executed capacity can you achieve?

A: Today we are at 32,000 megawatt, we will achieve another 4,000 megawatt this year and another 5,000 megawatt next year. By end of 11th plan we should be about 40,000 megawatt.

Q: By the end of fiscal year 2012, you will have achieved 9,000 megawatt more incremental capacity?

A: We would have achieved about 8,000-9,000 megawatt more. We will come to 40,000 megawatt total.

Q: From the current level of 33,000 megawatt?

A: As on date it is about 32,000 megawatt so we will come to 40,000 megawatt total and then we are going to 75,000 megawatt in the next five years.

Q: You have also price bid for Rs 25,000 crore of orders which opened up on October 8. By when will those contracts be awarded out for the large BTG equipment?

A: By January end.

Q: By the end of January for all of them?

A: Yes, for BTG by January end and the boilers also by this fiscal.

Q: Have you made, disclosed or arrived at L1 status for any of these large tenders already because there has been a lot of talk in the market, of specific players, who have got L1 status in many of the contracts they have bid for?

A: The tender was very uniquely cast, in the sense that everybody gets a part of the pie. We are evaluating all the tenders. We will get a good response from three parties for getting the larger chunk and the others will also get a share.

Q: Those three parties would include L&T? There was some confusion a few months back about L&T for one of the contracts which they subsequently rebid for?

A: No, L&T is not in the turbine package but definitely in the boiler package.

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