MUMBAI: The head of India’s central bank on Monday called for the International Monetary Fund (IMF) to stop “applauding” the monetary easing policies of many developed countries.
Reserve Bank of India governor Raghuram Rajan said in a speech that the IMF should be doing more to assess the knock-on effects of stimulus measures on the global economy.
“The IMF is supposed to be looking at these sorts of issues . . . but it is sitting on the sidelines and applauding such policies,” he told a G20 consultation meeting in Mumbai.
A number of developed economies, most notably the United States, have engaged in significant monetary easing to boost their economies as global growth slows.
But Rajan said some of the policies had been “extreme” and ultimately detrimental to emerging markets, which struggled to cope with large inflows of capital which then disappeared when the easing stopped.
Rajan, the former IMF chief economist, said in his address that the policies initially encourage growth but the effect quickly wears off, leading to a “musical [chair-like] crisis.”
“We are in dangerous territory,” he said in the speech, which comes ahead of the G20 summit in Turkey next month.
India, whose economy is expanding at around seven percent, is presently the best performer of the group of emerging markets known as the BRICS, which is also composed of Brazil, Russia, China and South Africa.
Last month, Rajan said Brazil’s current economic malaise stemmed from trying to grow too quickly by “overemphasising old and ineffective methods of stimulus.”