The Reserve Bank of India (RBI) this week named Raghuram Rajan its new governor. Rajan sat down with us a few months ago in his current role as the country’s top economic adviser to talk about several issues he sees ahead for the world’s largest democracy. He was direct about the toughest issues facing India (infrastructure), but overall was optimistic about the opportunities that lie ahead.
One of the larger challenges he inherits in his new role is the recent outflow of capital from the country, which has played a part in the Indian Rupee trading at its lowest ever level against the dollar earlier this week. At the time of our interview, he had this to say:
We want to make sure foreign investors feel welcome… especially long term investors, and that’s why I say there’s a tremendous opportunity in areas like infrastructure, where we want people to come in and bring their know-how, bring their capital, but be able to make profits in India, but provide good services, and I think India’s open.
Stemming the rupee’s fall will be among the first tests for Rajan. Recent intervention from the RBI to help boost the currency’s value seemed to have little effect so far, though after his appointment was announced, the currency bounced back slightly. Rajan is viewed as having a pro-growth economic philosophy. And judging from his comments to us, he has hope that the economy can bounce back. India’s growth last year slowed to 6.2 percent and this year is just above 5 percent after sitting above 9 percent for most of the last decade.
In a speech at last year’s Global Financial Leadership Conference, Rajan alluded to the slowing BRIC economies, and how they will respond to slowing down, and needing to provide demand:
The last ten years have been good for the emerging markets because someone else provided the demand… Now industrial countries can’t do it anymore. The emerging markets have to do it. Are they up to snuff?”
The above video is an edited version of our conversation.