Global economy risks 1930s-type Great Depression: Rajan
Warning that the global economy is on the brink of a situation similar to the Great Depression of the 1930s, Reserve Bank of India Governor Raghuram Rajan has asked central banks from across the world to define "new rules of the game" to avert a repeat of the recent global financial crisis.
"I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth," Rajan said here at a London Business School conference on Thursday evening. 
"We need rules of the game in order to effect a better solution. I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action," the RBI governor said.
"And, I think it's a problem for the world. It's not just a problem for the industrial countries or emerging markets, now it's a broader game," he added.
Rajan, who had predicted the 2008 US financial collapse and has been warning that global markets are now at the risk of a crash due to the competitive loose monetary policies being adopted by developed economies, said an international consensus was needed to be built over time.
"I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action," he said.
When Rajan took charge at RBI in 2013, at a time the US Federal Reserve had declared its intent to wind down its stimulus programme, the rupee plunged in value in respect of the US dollar on fears about a spiralling current account deficit.
In a series of measures, Rajan managed to stabilize the currency that also brought back investors. "Rajan's disciplined and focussed approach in leading the Reserve Bank during his first year as governor was remarkably impressive," British magazine Central Banking said earlier this year giving Rajan their central banker of the year award for 2015. 
In 2011, he published the acclaimed "Fault Lines" on how hidden financial fractures threaten the world economy.
Pointing to the very low interest rate policies of the US Federal Reserve, the Bank of Japan and the Bank of England in a bid to stimulate their economies, Rajan has been warning that emerging markets are especially vulnerable to big shifts in capital flows triggered by the unprecedented monetary accommodation in rich countries.



MG Warrier

2 years ago

One wishes, those who are managing world’s resources listen to the concerns expressed by Dr Rajan. In the introduction to his book “Fault Lines”, Dr Rajan explains the use of the metaphor of fault lines thus:
“In geology, fault lines are breaks in the Earth’s surface where tectonic plates come in contact or collide. Enormous stresses build up around these fault lines. I describe the fault lines that have emerged in the global economy and explain how these fault lines affect the financial sector.”
Quoted this, to flag the clarity of the teacher in Rajan in explaining the multi-dimensional economic riddles bothering governments, planners, economists and other stakeholders at this crucial stage of economic development and the acceptability of his suggestions.
Dr Rajan concluded his postscript to the book with the following observation: “We have uncovered deficiencies, and we know that the system has little capacity to sustain a repeat. We will bicker, no doubt, and we will try easy options. But eventually, as we realize that there is no alternative to addressing our real problems, democratic debate, coupled with human ingenuity, will come up with widely acceptable solutions to our problems. We may not see those solutions now, but so long as we are aware of the problems we have to solve, and work on them, I have no doubt that solutions will emerge.”
The optimism about India expressed in the chapter “Afterword: What Lies Ahead for India” explains why Dr Rajan is in India today. Destiny has now positioned Dr Rajan in a slot from which he will be able to contribute towards realising his vision. Let us wish, Reserve Bank led by Dr Rajan will guide Indian financial sector to play the proactive role in the country’s growth story, making this decade special for all Indians.

Evacuation of stranded pilgrims begins in Uttarakhand
The Uttarakhand government on Friday began rescue and evacuation measures for the stranded pilgrims hit by inclement weather during the annual Char Dham Yatra, officials said.
The state has received heavy rainfall in the last 24-hours from Thursday morning and the meteorological department has indicated no sign of respite from the monsoon showers. 
While five Indian Air Force (IAF) choppers have been pressed into service to help and evacuate stranded pilgrims on various routes of the pilgrimage, many army personnel have also been sent to repair bridges that have been swept away or damaged in the downpour.
Rescue operations by the State Disaster Relief Force (SDRF) also began at Govindghat, Ghangharia, Guptkashi and many other places in Chamoli district, district officials told IANS.
The Laxman Ganga bridge in Chamoli has suffered extensive damage and efforts are on to repair it. 
The Alaknanda river, which caused maximum damage in the flash floods of 2013, is once again in spate.
Hundred metres of Badrinath highway has been washed away in Lambagad and thousands of pilgrims, tourists and locals are stranded on the route. 
Besides, 1,500 people were halted in Badrinath while over 800 pilgrims are caught in inclement weather en route to Hemkund Saheb.
The motor bridge at Soneprayag has also been washed away in the torrential downpour and Gangotri highway has also been closed, informed the officials. 
The officials also said that Uttarakhand Chief Minister Harish Rawat was personally monitoring the situation and added that the first priority of the state government was to ensure the pilgrims' safety.


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