Raghuram Rajan was the keynote speaker on Monday at the 'T20 meeting: Turkey, India and the G20' event, organised by Indian think tank Gateway House and The Economic Policy Research Foundation of Turkey (TEPAV).
Calling for new regulations for multilateral institutions to rooting for sustainable growth rather than fast growth, the RBI Governor spoke about numerous things at an event in Mumbai. Raghuram Rajan was the keynote speaker at 'T20 meeting: Turkey, India and the G20' event organised by Indian think tank Gateway House and The Economic Policy Research Foundation of Turkey (TEPAV).
Here are some things that Rajan said in his keynote speech
1. Need new rules for the game: Rajan said there was a need for new regulations for multilateral organisations to ensure global growth. He said that currently central banks "do not have a mandate for the world". He added that extreme monetary policies and exchange rate interventions are usually engaged to boost growth, however, the IMF, as a part of its role, needs to keep an eye on the effect of these "extreme" policies rather than only looking at the positives.
He also called for more coordination between leading central banks, stressing on the need for optimal use of monetary policies. Rajan said there was a need for political consensus to get a mandate for the world as monetary policies around the world affect eachother.
2. High debt has limited recovery since 2008 crisis: The RBI Governor said that industrial growth has been low around the world, and has failed to recover in the typical 'V' shaped pattern due to high debt amassed by corporates and now, by governments around the world. He said that the sub-prime crisis, the European crisis and now the emerging market crisis, are all the same. "We have a global game of musical crisis," he said explaining the spread of economic crises around the world through the policies of the 1990s.
3. Create jobs: "If we look around in the country, one of the biggest sources of worry that business people have is they don't find the people for the kind of jobs that they have. We need to improve the quality of our human capital," Rajan said.
He said that around the world, middle class jobs are lost to technology or to other countries. Rajan said it is imperative to ensure middle class jobs are retained to maintain structural stability.
4. Infrastructure-led growth
Rajan said that there is constant stress on investing in infrastructure as it gives high returns. However, "finding worthwhile infrastructure projects that will really move the needle is difficult", Rajan said. "Large infrastructure projects are harder to find, coordinate, and implement," he said.
Rajan said that emerging markets working on expanding infrastructure need support. However, he said that leaning on private investment wasn't the best idea. There have been more and more calls for private companies to fund infrastructure development, while multilateral institutions only advice. He said, "private capital may not be patient enough;" while multilateral institutions can provide both, patient capital and advice.
5. Structural reforms:
Rajan stressed on the need for structural reforms around the world to kick start growth. He said there was a need to boost demand by moving money to the poor as they spend nearly all the money they get on essentials, thereby keeping the demand going, while "you don't have much to spend on when you're really rich," restraining demand.
He said that everyone is "waiting for someone to step up and grow, and pull the rest of the world". He said, it was first the Us, and later China that were looked upon as growth engines. He said there is a need to however keep an eye out for unconventional and extreme monetary policies
6. Boost supply side too, not just demand
We have to create underlying supply conditions that would allow us to sort of have much higher demand. In some sense I see 9% growth as a situation where we are investing tremendous amount and thus creating the supply which will then help the demand.
"So what we need to do is not just boost demand, but we need to boost supply also, which means lot of work on a number of fronts which the government is currently engaged".
He added: "It is a steady process rather than an overnight process. It will take some time. I don't think that we will go overnight. That (the 9 per cent) is certainly an aspiration we should have, but we need to eliminate the supply constraints, including our human capital."
7. Sustainable growth rather than fast growth
Instead of going for a fast growth rate, Rajan called for the need to grow slowly but sustainably. He said, "it is very difficult for governments to accept slow growth. They cannot delivery on promises made during high growth (period). He said, growth shouldn't be for the sake of growth but for the distribution of growth.
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 "RBI Governor Raghuram Rajan")
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