India should focus on self-interests too: RBI Governor

 Stating that India needs net foreign financing to run a current-account deficit for the foreseeable future, the RBI Governor said, ‘India should also deepen regional, domestic demand and strengthen its macro-economic institutions.’ Sai Nikesh | The Dollar Business

Reserve Bank of India (RBI) Governor Raghuram Rajan on Tuesday cautioned India with safeguarding her own interests in the wake of growing Foreign Direct Investments into the country. “India should not be railroaded into compromising its interests to attract FDI,” said the RBI Governor, in a commentary posted on the Project Syndicate website. He, however, opined the most stable form of financing, FDI, would bring in technology and methods. The RBI Governor also pitched for the quick solvation of contractual tax disputes and framing of transparent policies, saying that the efforts to this effect are already underway. Stating that India needs net foreign financing to run a current-account deficit for the foreseeable future, the RBI Governor said, ‘India should also deepen regional, domestic demand and strengthen its macro-economic institutions.’ Fuelling growth through domestic demand should be carefully managed and for achieving this goal, India requires efficiency-boosting investments, particularly in the infrastructure sector, he added. He also focused upon the improvement of human capital as a key factor to boost the health care and other key sectors. Over the relations with the global nations, the RBI Governor said that India cannot afford to put itself in a position of needing multilateral support, the result of which may put the country’s economy under large account deficits. He, however, said that the strong, independent, multilateral institutions that can play the role of impartial arbiter in facilitating international economic transactions are in India’s interest. On India’s energy security, he said that it is not dependent on owning oil assets in remote fragile countries, but on ensuring that the global oil market works well and is not disrupted. Speaking on the global monetary system, Raghuram Rajan said, “As of now, the international monetary system remains dominated by the frameworks implemented by the developed economies,” adding that, there is a growing need for rapid overhaul of the system. As the developed economies are facing less growth, they are in hunger for open global system and as a result, the emerging economies like India may have to face the burden of keeping the global economy open. In this regard, India can no longer simply object to the proposals put forth by the developed economies, it should also put its points, said the RBI Governor and called the Indian Universities, research institutes to come up with the ideas that favour Indian market and benefit the Indian representatives.  

This article was published on February 3, 2015.