Rajan slams IMF for ‘applauding’ easy money policies of developed economies

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

MUMBAI: Reserve Bank of India (RBI) governor Raghuram Rajan on Monday urged the International Monetary Fund (IMF) 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.

Rajan, himself 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.

“The IMF has been sitting on the sidelines and applauding these kinds of policies right from when they were initiated, and hasn’t really questioned the RAGHURAM RAJAN, RBI governor

value of these kinds of policies,” he told a G20 consultation meeting here. “We can do better.”

Noting that emerging markets were engaging in currency intervention that sparked competitive devaluations, he said these markets should push back against such policies.

Some central banks, including those in the US 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 US is now considering raising interest rates for the first time since 2006, which poses a threat of foreign fund outflows from emerging markets such as India.

He also said emerging markets should develop more capable economists who can help steer global policy discussions. “We must, across the emerging world, realise that the reason why global governance seems to be against us is we are not putting enough resources into this.”

Indian media has speculated that Rajan could be a contender to head the IMF after the fiveyear term of the current head, Christine Lagarde, ends in 2016.

Rajan’s three-year tenure at the RBI ends September 2016, but he has said he is not interested in an IMF position.

Rajan’s comments come amid fears of hard-landing of the Chinese economy. The euro zone is yet to come out of a prolonged slump, and the US economy too is showing signs of slowing.

REUTERS, PTI