Not all about China

Says India's central banker Rajan

In my job, meeting central bankers is par for the course. It goes with the territory, reports BBC.
But it’s not every day you meet one like India’s Raghuram Rajan. He’s been called the “rockstar central banker”, “the Bond of banking” and stockbrokers and socialites alike have swooned over Rajan’s ability to revive India’s economy out of the doldrums, helping it to turn into one of the fastest growing in the world today.
He’s done this by keeping a tight watch on inflation, cutting interest rates only when he deems absolutely necessary and improving the country’s foreign reserves. But the recent turmoil in China’s stock markets has given even this usually sanguine central banker a reason to reflect.
“Every adverse development across the world affects the rest of the world in some way,” he told me in an exclusive interview in his offices in Mumbai, the Indian financial capital.
“It works through financial markets first, then trade later. So it’s something that everyone is concerned about. But you have to be careful about attributing everything to China. There are a number of concerns about when interest rates will normalise around the world - and there’s also questions about whether some markets are just too high.”
Rajan is widely credited for being one of the few voices
accurately predicting the global financial crisis in 2008. At the time many scoffed at the concerns he raised, but his gloomy outlook was uncannily accurate. This time though he doesn’t believe there’s a financial crisis ahead. “Based on what I’ve seen so far there’s no strong reason to believe that we’re on the verge of another crisis,” he says. “But we have to be vigilant about some of those fragilities that have built up.” Some of those fragilities exist far closer to home than Rajan may want to admit.
India’s economy may be growing at a faster rate than China’s, but some parts of the real economy have yet to feel that growth.
The monsoon is also a big factor in how well the Indian economy does - although agriculture only makes up 17 per cent of the economy, roughly half of the Indian population makes a living through farming, and the monsoon is a key factor in whether rural demand picks up or not.

 

Not all about China

Says Indias central banker Rajan

In my job, meeting central bankers is par for the course. It goes with the territory, reports BBC. But its not every day you meet one like Indias Raghuram Rajan. Hes been called the rockstar central banker, the Bond of banking and stockbrokers and socialites alike have swooned over Rajans ability to revive Indias economy out of the doldrums, helping it to turn into one of the fastest growing in the world today. Hes done this by keeping a tight watch on inflation, cutting interest rates only when he deems absolutely necessary and improving the countrys foreign reserves. But the recent turmoil in Chinas stock markets has given even this usually sanguine central banker a reason to reflect. Every adverse development across the world affects the rest of the world in some way, he told me in an exclusive interview in his offices in Mumbai, the Indian financial capital. It works through financial markets first, then trade later. So its something that everyone is concerned about. But you have to be careful about attributing everything to China. There are a number of concerns about when interest rates will normalise around the world - and theres also questions about whether some markets are just too high. Rajan is widely credited for being one of the few voices accurately predicting the global financial crisis in 2008. At the time many scoffed at the concerns he raised, but his gloomy outlook was uncannily accurate. This time though he doesnt believe theres a financial crisis ahead. Based on what Ive seen so far theres no strong reason to believe that were on the verge of another crisis, he says. But we have to be vigilant about some of those fragilities that have built up. Some of those fragilities exist far closer to home than Rajan may want to admit. Indias economy may be growing at a faster rate than Chinas, but some parts of the real economy have yet to feel that growth. The monsoon is also a big factor in how well the Indian economy does - although agriculture only makes up 17 per cent of the economy, roughly half of the Indian population makes a living through farming, and the monsoon is a key factor in whether rural demand picks up or not.