This is by far the most detailed piece on Raghuram Rajan, RBI Governor, that I have read. I liked it. Read it and you will get a glimpse into his thinking.
I have read his book Fault Lines earlier. I was impressed with his long-range thinking. His prelude to the financial crisis dates back many decades. Changes in technology, which lead to sections of society lagging behind because of being unskilled and not educated enough, politicians who try to help them with easy money and housing as a dream, and unregulated banking, are part of this narrative.
He has also criticized easy money policies in the US. If he does that here too in action, and not only words, it should bode well for the Indian economy over time. Industrialists have got used to cheap money. There are negative real rates. There is little incentive for savings. There is talk that the focus of the RBI will be shifting from Wholesale Price Inflation (WPI) to Consumer Price Inflation (CPI). This makes sense because the economy is not the industry only. It includes the common man too.
Chidambaram is asking for rates to be brought down to improve growth. The question is growth for whom and at what cost to the economy. I don’t think this type of growth for a few is helping the country.
We might have to take bitter medicine today to get better tomorrow. It is much better than being in an economy in limbo.
Enjoy reading this piece – Line of Credit – Caravan – article on Raghuram Rajan
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