Banking reforms alone, however, aren’t going to bring foreign investors back or prevent the rupee from falling further. This is Rajan’s real challenge. He is stepping into a stew of financial chaos, missed opportunities and political paralysis that has been simmering for years. It’s no longer inconceivable that India could become the first of the Brics economies – Brazil, Russia, India, China and South Africa – to lose its investment-grade rating. And Rajan may not be able to do anything about it. First of all, the RBI’s new governor has no control over what really ails India. Sure, he can try defend the rupee and get a handle on India’s 10 percent inflation. He can use his international credibility to soothe markets as the Federal Reserve withdraws stimulus. Even the most respected central banker, though, can’t stop politicians from spending without accountability. He can’t stop corruption, make the government more transparent, or attack the red tape that deters investment and strangles growth. Rajan can’t tweak tax policies to broaden revenue streams and encourage an explosion of startup companies. He can’t reform education and training programmes, or see to it that India has as many toilets as cellphones. He can’t spearhead the infrastructure improvements that are needed to create more manufacturing jobs. He can’t strike bargains between the parliament in New Delhi and powerful state leaders, who are at odds on virtually every upgrade the economy needs. dkjain4970927092007.blogspot.in/2013/09/rbi-new-governor-cant-cure-sickness.html
Posted on: Sun, 08 Sep 2013 16:21:50 +0000
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