RBI Governor Raghuram Rajan has urged greater co-ordination among countries to tackle spill-over effects — the impact that economic policies in some countries may have on other economies.“How do we alter global governance to accommodate important countries like India which are growing stronger by the day,” Mr Rajan said in a speech at the release of a book, The World in 2050 .
“How do we take cognizance of the fact that the world is quite integrated and therefore, policies across countries have spill-over effects and today we don’t have a system to coordinate these spill-overs; each country does what it has to and other countries have to accept that and the consequences,” he said.
The former International Monetary Fund chief economist has been critical of ‘ultra-low’ monetary policies adopted among some countries in the developed world. Their decisions to keep interest rates low to support growth and re-inflate their economies have impacted emerging market economies.
“So how do we change global governance to accommodate a world which is much more integrated where resources are much more shared,” he asked.
He cited the example of Brexit, which is the possibility that Britain will withdraw from the European Union. The country will hold an in-out referendum on its EU membership on June 23.
“The kind of anxiety comes at a time when a number of countries are already asking: Are we too integrated?” There are many actions that are uncoordinated, he said. “That is a concern for a number of countries which are saying, ‘we should not be so integrated’. It’s a debate, for example, in the Brexit: ‘have we given up too much sovereignty, should we go back?’” he said.
The governor also talked about technology and how it could impact the world going forward.
According to Mr Rajan, there is anxiety among the middle class that jobs are disappearing because of technology or globalisation.
What is to be done? “Nobody quite knows what, but populists are saying we have the answer — keep out the immigrants... I don’t know what they say about technology but presumably keep out the robots too, and somehow, we will keep and preserve these jobs.”
