RBI Governor Raghuram Rajan Urges Indian Monetary Fund To Question Extreme Policies

19/10/2015 3:36 PM IST | Updated 15/07/2016 8:25 AM IST
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Newly appointed Reserve Bank of India (RBI) Governor Raghuram Rajan attends a press conference at the RBI headquarters in Mumbai, India, Wednesday, Sept. 4, 2013. (AP Photo/Rajanish Kakade)

MUMBAI -- Reserve Bank of India (RBI) Governor Raghuram Rajan urged the International Monetary Fund (IMF) on Monday to play an active role in questioning the stimulus policies of developed economies and called on emerging markets to have a bigger voice in global debates.

Raghuram Rajan, a former chief economist of the IMF, said developed countries were adopting monetary policies without consideration for the negative impact they have on the global economy and he noted emerging markets were engaging in currency intervention that sparked competitive devaluations.

In a speech ahead of a G20 summit in Turkey next month, Rajan said it was time for policymakers, led by the IMF, to address these "extreme" policies, otherwise "we have to worry where this ends."

"The IMF has been sitting on the sidelines and applauding these kinds of policies right from when they have been initiated, ‎and hasn't really questioned the value of these kinds of policies," he told a G20 consultation meeting.

"We can do better," he said, calling on emerging markets to push back against such policies.

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.

Some central banks, including those in the United States and the euro zone, adopted so-called quantitative easing policies to counter the global financial crisis. After cutting rates to zero, they pumped cash into their economies to try to revive economic activity. The United States is now considering raising interest rates for the first time since 2006.

Indian media has speculated that Rajan could be a contender to head the IMF after the five-year term of the current head, Christine Lagarde, ends in 2016. Rajan denies any interest in the position and his three-year tenure at the RBI doesn't end until September 2016.

Since his RBI appointment in 2013, Rajan has called on emerging markets to have a bigger voice globally, including at the IMF. Otherwise, industrialised economies will always lead the debate, he says.

Rajan said it was critical emerging markets develop more capable economists, who can help steer discussions among policymakers globally.

"We must, across the emerging world, realise that some of the reasons why global governance seems to be against us is we are not putting enough resources into this," he said.

"Yes, we go to our think tanks, etc. But we don't have people working in government who have that kind of training, that kind of capacity," he added.

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