World is in deep recession, says Raghuram Rajan as he indicates willingness to work with India govt

New Delhi: Former RBI governor Raghuram Rajan on Saturday indicated his willingness to work with the Indian government if approached for assistance to deal with the economic fallout of the coronavirus lockdown. "The answer is a straightforward yes," Rajan told NDTV when asked if he would return to India if asked for his expertise on economic matters during the pandemic.

Rajan, 57, who was the RBI governor for three years until September 2016, is currently working as a professor at the prestigious University of Chicago. Rajan is already part of a 11-member external advisory group set up by the IMF to provide perspectives from around the globe on key developments and policy issues, including responses to the exceptional challenges the world faces now from the rogue virus.

The former RBI governor noted that the world is 'almost surely in a deep recession.' "Hopefully, we will see a rebound next year, and it depends on measures we take to prevent a recurrence (of the pandemic)," he said during the interview.

"The first sign of difficulties in India is often seen in foreign exchange. So far compared to other emerging markets our exchange rate has stayed quite stable, presumably from some support of the Reserve Bank of India. I should say we have depreciated some against the dollar, but you know countries like Brazil have gone down 25 per cent. We haven't been in that situation," he said.

"If the virus spreads, as it has spread in Italy and the United States, we have to take it very seriously. What you see in these countries is a tremendous effect on public health, the overburdening of many hospitals and many deaths and of course, when that is happening economic activity is hard to carry on," Rajan said.

Rajan has suggested to the Indian government to call people with proven expertise and capabilities, including from opposition parties, to deal with perhaps the greatest emergency being faced by the country since Independence following the outbreak.

He also cautioned that driving everything from the Prime Minister's Office, with the same overworked people, may not be of much help. "There is much to do. The government should call on people with proven expertise and capabilities, of whom there are so many in India, to help it manage its response. It may even want to reach across the political aisle to draw in members of the opposition who have had experience in previous times of great stress like the global financial crisis.

"If, however, the government insists on driving everything from the Prime Minister's Office, with the same overworked people, it will do too little, too late," Rajan said in a blog titled 'Perhaps India's Greatest Challenge in Recent Times'.

He said economically, India is probably facing its greatest emergency since Independence.

"The global financial crisis in 2008-09 was a massive demand shock, but our workers could still go to work, our firms were coming off years of strong growth, our financial system was largely sound and our government finances were healthy. "None of this is true today as we fight the coronavirus pandemic," Rajan noted.

He, however, asserted that with the right resolve and priorities, and drawing on India's many sources of strength, it can beat this virus back, and even set the stage for a much more hopeful tomorrow.

Rajan stepped down after a single term as RBI governor in 2016 after he was constantly at lockhorns with the central government. It is no secret that he lacked support from then Finance Minister Arun Jaitley and Prime Minister Narendra Modi.

Rajan has been a vocal critic of the Modi government's economic policies, including demonetisation.