RBI Governor D. Subbarao gives valuable tips to IIM-B students at convocation

Reflecting on the “double-edged sword” of globalisation, Reserve Bank of India Governor D. Subbarao asked young graduates, set to embrace their management careers, to “learn to manage globalisation in ways that will maximise its benefits and minimise its costs”.

He was delivering the convocation address at the Indian Institute of Management-Bangalore's annual convocation, here on Friday, where 570 students studying in five flagship courses were awarded their degrees. Chairman of the governing board of IIM-B and Reliance Industries Mukesh Ambani, handed students their degrees.

Even as India's ratio of external trade to GDP has gone up to 37 per cent, compared to 8 per cent in 1972, Mr. Subbarao emphasised that globalisation had indeed posed “ruthless challenges”. In comparison, he pointed out that its financial integration — a more complete measure that computes the two-way flow of goods and finance in and out of the country — has gone up eight times in the same period.

Economic challenges

Mr. Subbarao presented students with a birds-eye view of the economic challenges we face, in the context of globalisation and financial liberalisation, and spoke on the dilemmas faced by the RBI in having to “make policies that have to reckon with global developments over which we have no control”. He located this dilemma in the “impossible trinity argument” in economics that asserts that a country cannot simultaneously maintain all three policy goals of free capital flows, a fixed exchange rate and an independent monetary policy.

Ruthless challenges

Globalisation, he said, offers immense opportunities but also poses ruthless challenges, a fact that is best demonstrated by the global financial crisis of 2008-2009. “That a bubble in a quintessentially non-tradable sector like housing snowballed into a global financial crisis, taking a devastating toll on global growth and welfare, is a demonstration of the ferociousness of the forces of globalisation,” he said.

Calling for a “more nuanced approach” to globalisation, he said that hasty or imprudent financial liberalisation is the main cause behind financial crises. While technological progress and declining transport costs offer opportunities for increasing the benefits of trade, he said this does not guarantee that governments will remain committed to open trade and open finance. Mr. Subbarao also dwelt on the threat to globalisation that arises from political compulsions.

Expansion and research

Addressing the graduating batch of 2010-2012, IIM-B Director Pankaj Chandra said that the Ministry of Human Resource Development had come forward to provide additional support to the institute and to strengthen the fellowship programme in management, a move that aims at giving a special thrust to research at the institute and around the country. He also thanked the Karnataka government for the allotment of 110 acres of land for the “long-term expansion of the campus”, situated around 25 km from the current campus on Bannerghatta Road.

Among other notable achievements mentioned by Mr. Chandra were the commencement of work on the state-of-the-art classroom complex, and a sports complex, and the setting up of an Open Knowledge Initiative to make knowledge and quality education available online (facilitated by institute alumnus Vikas Kedia).