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Subbarao fears fiscal deficit to fuel next crisis

  
Analysis, Economy, Education
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RBI GOVERNER

The Reserve Bank of India (RBI) governor, Duvvuri Subbarao, expressed fear that the next financial debacle could stem from a currency crisis or from the way the government handles its ‘stimulus exit’. Speaking at the first International Research Conference organised by RBI here on Saturday, Subbarao said,

“I worry that in resolving this financial crisis, perhaps we are sowing the seeds of the next crisis. Next crisis could be a currency or a fiscal crisis.” The central banker, however, denied that RBI would back out from its commitment to full convertibility of rupee but would impart flexibility to its pre-determined course in the light of the recent global economic developments.

Participating in a panel discussion, the RBI governor said the developed economies may fail to wind down their borrowings, leading to cyclical deficits morphing into ‘structural fiscal deficits’, affecting the system as a whole. In the wake of global credit crisis, following the US sub-prime crisis in 2008, many governments and central banks pumped in huge funds and resorted to low-interest-rate monetary policies, for boosting their sagging economies. These have resulted in bloating of fiscal deficits. (more…)

Will Rao and FM take a long march into future?

  
  Education
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Will Rao join the FM in the walk-back hand-in-hand with each other?
 
Subbarao, the former RBI governor fired some salvos as a parting gift to the current FM last Thursday. That it took him 5 years to take a broadside at the FM on the last working day of his career, shows how little spine the Central Banker had been left with.
 
More importantly, it brings to the open certain disturbing signs that were spoken off in hushed tones but are now visible in the open.  The lobby of students who have read Economics at school and who now run what else-but the national media and newspapers lapped up Rao’s speech.
 
But who’s responsibility was Rao alluding to when he raved and ranted over the North Block interference and pressures. The fact that he highlighted that RBI was manned by the over 50s tribe, which had no knowledge of financial markets and he himself came from the IAS with a bare-bone graduate degree and past designation as Finance Secretary shows how poorly the educated in this country are treated. There is a segment of jobless PhDs who seek pastures overseas and there is the graduate lobby that has to it’s credit the achievement of having passed the IAS entrance exam but except for a 2-3 month training in Simla have not even the smithers of a professional knowledge. These are the people who run the nation’s finances. (more…)
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