Covid-19: India Crisis Reveals Complacency and Lack of Foresight, Says Raghuram Rajan | India News
“If you were careful, if you were cautious, you had to admit it wasn’t done yet,” Rajan said Tuesday in a Bloomberg Television interview with Kathleen Hays. “Anyone paying attention to what was happening in the rest of the world, in Brazil for example, should have recognized that the virus is coming back and potentially in more virulent forms.”
India is suffering the world’s worst outbreak of Covid-19 cases, with deaths reaching a record high on Sunday and new cases exceeding 350,000 a day. Pressure is being put on Prime Minister Narendra Modi to impose strict blockades to curb its spread, a move his government has so far avoided after last year’s economic devastation with a similar strategy.
After a drop in cases last year, “there was a feeling that we had endured the worst the virus could give us and we had gotten over it and it was time to open up, and that complacency hurt us,” said Rajan, a former international Chief Economist. of the Monetary Fund and now a professor of finance at the University of Chicago.
India’s relative success against the first wave of infections also likely led to it not quickly preparing enough vaccines for its own population, he said. “Some of that may be the feeling that we had time. That since we had dealt with the virus, we could implement the vaccine slowly, “he said, adding that the government is now” acting together “and in” emergency mode. ”
Rajan, appointed by the previous government in 2013 to head the Reserve Bank of India, became an outspoken critic of Modi’s administration after he took office during his tenure, highlighting the growing intolerance within the country and differing on the subject of dividends and RBI interest rates. . Hindu nationalists, who form a large base of support for Modi, questioned his loyalty to India and accused him of keeping interest rates too high.
The RBI has been “as accommodating as possible” to support the economy in the face of stubborn inflationary pressures. As doubts mount about the future performance of the Indian economy, the RBI’s “fairly large” foreign exchange reserves may offer “a measure of comfort for foreign investors.”
Meanwhile, in the US, a massive fiscal stimulus program and economic recovery may force the Federal Reserve to “rethink” its policies of staying on hold for the foreseeable future and expecting a sustained rise in inflation above your goal of 2%.
In that case, “a financial market that has been thinking that the Fed will not act in the near future is likely to be a bit surprised at the first signs that this will happen.”
While running the RBI, Rajan had criticized massive quantitative easing programs, particularly by the Fed, and warned that a lack of international coordination amid possible tightening would lead to market volatility, similar to the “Taper Tantrum” in 2013.
At the moment, he said Tuesday, “it appears as if the Fed has been somewhat overtaken by events.”