Monthly Archives: December 2014

Make in India, Largely for India

Its been long since I posted. But what a good time to do so.

I intend to comment on Dr. Raghuram Rajan Speech.

Make in India, Largely for India – Talk delivered by Dr. Raghuram Rajan, Governor Reserve Bank of India at the Bharat Ram Memorial Lecture on December 12, 2014 in New Delhi

This speech is really interesting as it seems to cautioning the government on its most touted step “Make in India”, may be only obliquely.

Dr Rajan first argues that the world might be going through the phenomenon on Secular Stagnation. Larry Summers started this discourse, but lately it has been lapped by most of the economists. He argues that there are offshoots of growth visible in recovery of US, but overall scenario is not  most inspiring. Recent contraction in Japan and near recession on Euro Zone are reasons to worry.

Next the world would be unable to accommodate a China like growth. So the way China stating in 80’s positioned itself as a world factory, same may not be possible for India. He explains mainly three reasons for the same.

1. Slow growth in Industrial world make it difficult for those countries to absorb more import from emerging economies.

2. Reshoring-The Industrial Countries themselves are improving on the capital intensive industries.

3. When India tries to boost its manufacturing exports it will have to contend with China, who still have some surplus agriculture labor to push into manufacturing. In total Export-led growth will not be as easy as it was for the Asian economies who took that path before us.

One point he specifically makes is that it is not the objective of Central bank to boost Sensex. If it happens it is a collateral benefit. The job is Regulator is ensure the soundness of underlying fundamentals.

Hats off this the guys. Certainly you need a lot of courage to be heading the central bank. Otherwise whims of politicians will surely make you look idiots.

Certianly Dr Raghuram Rajan has build a place for himself among the giants of policy making.