Global economy is “slowly slipping” into Great Depression-like problems of 1930s, RBI governor Raghuram Rajan has warned, asking central banks from across the world to define “rules of the game” to find a solution.
Rajan, who is among the few to have predicted the 2008 financial crisis, said the problem was a “broader” one and for the entire world — not just for industrial countries or emerging markets.
The former IMF chief economist said the situation is different in India on this front and the RBI remains more focussed on bringing down lending rates to spur investments. “We need rules of the game in order to effect a better solution. I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action,” he said at a London Business School conference.
“I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action,” governor Rajan said.
“But I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth. And, I think it’s a problem for the world. It’s not just a problem for the industrial countries or emerging markets, now it’s a broader game,” he observed.
The Great Depression refers to a period of severe global economic downturn in the early 1930s, which had affected almost all countries across the world.
It started in 1929 and continued till late 1930s.