The Hindu Business Line : Governments guarantee a must for capital flows: Doha Bank chief

Chennai, Nov. 29 The only solution to the current global financial meltdown and the consequent global economic growth is political consensus on economic reform, says Mr Raghavan Seetharaman, Chief Executive Officer – Doha Bank group, Doha, Qatar.

In simple terms, this means that governments must counter-guarantee inter-bank guarantees and deposits. (If for example, a US bank has lent to an Indian bank, the government of India should guarantee the US bank that its loans will be repaid.)

Mr Seetharaman, a globe-trotting NRI from Kumbakonam, Tamil Nadu, says some political consensus, on the lines attempted by the recent G-20 meeting, is indispensable for global economy to pick-up.

His own bank, which had said in May that it would enter India in a big way through a NBFC it had recently acquired, would wait and watch to see how the situation unfolds – a contrast with the rapid ramp-up that was then planned.

Describing the global situation as “beyond comprehension”, Mr Seetharaman noted that global institutions were disclosing their risks “drip-by-drip” and the problem, according to him is “how to measure off-balance-sheet risks”.

He said the current situation was also a big opportunity for India, whose biggest bargaining chip is the huge domestic market.

Mr Seetharaman wants India to ginger up liberalisation of financial markets, making way for free inflow of global capital.

He said the six countries of the Gulf Co-operation Council have a population of about 38 million (compared with India’s 1.2 billion). But their combined GDP is the same as India’s – $ 1 trillion. As such, countries such as Qatar, Dubai and Oman are sitting on huge investible surpluses, he said.

Oil prices

Mr Seetharaman, who is considered an expert on oil prices, said that the prices of crude would settle between $60 and $65 by early next year and stabilise at that level for the medium term.

Observing that there is no increase in demand, from the existing level of 86 million barrels a day, he said he saw no supply side constraints. OPEC, he said, produces only about 40 per cent of the world’s oil. “I am not a great believer in that the OPEC can manage the prices,” he said, noting that countries such as Russia will stabilise supplies in case OPEC cuts production.

Mumbai Impact

Mr Seetharaman said the terrorist attacks on Mumbai would not affect India’s economy. “It is very unfortunate such events have happened. But will they destabilise the economy? Will it stop foreign direct investments? No,” he said, stressing that “stray incidents cannot impact fundamentals.”

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