The Hindu Business Line : ‘We are responding to the crisis as it impacts on us’

(from left) Dr C Rangarajan, former Chairman of PM's Economic Advisory Council, Dr Rakesh Mohan, Deputy Governor of RBI, Mr Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Dr Bimal Jalan, former Governor, RBI, and Dr D. Subbarao, Governor RBI, in the Capital on Tuesday. A book `Monetary Policy in a Globalized Economy: A Practitioner's View' written by Dr Rakesh Mohan was launched. -Kamal Narang

Our Bureau

New Delhi, Feb. 10 The Reserve Bank of India Governor, Dr D Subbarao, has made it clear that it is not possible for the central bank to lay a roadmap of precise steps to deal with the global financial crisis that is adversely impacting the Indian economy.

“This is because there is no precise roadmap. We are responding to the crisis as it impacts on us”, Dr Subbarao said at a book release function here.

Dr Subbarao also said that the RBI had calibrated its response through the evolution of the crisis in India.

“We have of course looked at what other countries have done. We have evaluated what they have done. We have learnt from what they have done. But we have not necessarily copied what they have done", he said.

He pointed out that in the rich countries the crisis travelled from the financial sector to the real sector. However, in India, the crisis is travelling from the real sector to the financial sector.

“Every country around the world has been hit. Countries have responded depending on their current context. The criticism that we must do something because other countries have done something is misleading and misinformed”, he added.

He also countered criticism that the RBI had not been aggressive in its monetary policy in dealing with the adverse impact of the global financial crisis. “I think we have been aggressive in our response (monetary policy). The speed of the response is not the main point (real issue)”, he noted.

On criticism that the RBI response has been incremental, reactive and behind the curve, Dr Subbarao said that it was “valid argument” to some extent.

“But I want to say that in September (when Lehman collapsed) nobody knew the evolution of the crisis in the next three months. Today nobody knows what will happen in the next three months”, he said.

The RBI Governor noted that there is lot of uncertainty around the world, perhaps a bit less of nervousness.

“It is not possible for any central bank much less the RBI to have a roadmap for everything. It is not that we do not have a contingency plan. We do” Dr Subbarao said.

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