Raghuram Rajan Says Need to Push for Sustainable Economic Growth

“What we need to do is not only boost the demand but also supply”, he said at an event organised by Gateway House, an institution focusing on global relations. Rajan linked the easy and predictable taxation to achieving the goal of “Make in India” plan of the government saying, “Let’s make in India, but for that we need to create the framework, let’s make the business easier”.

He added however that reaching 9 per cent growth rate is a steady process and can not be attained overnight. He stated that there is a need to eliminate the supply constraints including human capital.

“The International Monetary Fund is supposed to look at these in a global sense, but it has been sitting on the sidelines applauding these kinds of policies ever since they were initiated and hasn’t really questioned the value of these kinds of policies”, said Rajan, who is a former chief economist of the International Monetary Fund.

“We are in risky territory”, he said in the speech, which comes ahead of the G20 summit in Turkey next month.

Rajan did not single out any one country, but he has emerged as a leading critic of ultra-loose monetary policies and those that he says have purposefully pushed down their currencies to gain a competitive advantage. The current head, Christine Lagarde, was appointed in July 2011 for a five-year term. Rajan’s worries on inflation stem from having cut the policy rate by an unexpected 50 bps on the September 29 policy, cumulatively bringing down the RBI policy rate by 125 basis points since the beginning of the year to 6.75 per cent. He also has a mandate to tie consumer prices at or below 6 per cent by January next.

Rajan said it was critical emerging markets develop more capable economists, who can help steer discussions among policymakers globally. “Canada has seven strong economists working on this group and trying to further the agenda, while India brings fewer people to the table because we don’t have that strength in the number of economists that we can actually contribute”, he said, observing the country did not have many people in the government with that kind of training and capacity.

“As a result, what happens is more of the pen and the writing is done by the Canadians and they step up to the play. There is nobody looking at them”, he said.