Western Govts Must Do More To Revive Economies: RBI Governor

Reserve Bank Governor Raghuram Rajan said he would like the governments of the developed countries to do more instead of depending on monetary policies to boost their economies.

"My colleagues in industrial countries are trying too hard (to revive their economies), and I would prefer monetary policy to do less and other parts of the economy, including the political system, to do more. If we try too hard, then we raise the probability of a crisis," Rajan said.

In an interview given to the London-based Central Banking Journal last week, Rajan had warned of a global crisis as a result of an asset price crash due to the cheap money.

"We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost," Rajan warned.

He also expressed apprehension that central banks "may be exhausting room on the financial side and creating a situation where there will be a discontinuous movement in financial sector."

"Instead of the political system taking action, reforming the economy, etc, as industrial countries also need reforms, they are relying on the monetary authorities to provide whatever boost that was required. I thought this was dangerous because monetary authorities across the world are boosting asset prices rather than real activity," he said.