What has RBI/India learnt from the financial crisis?

RBi Governor, Dr. Duvvuri Subbarao gives a nice speech on the topic.

Most of the lessons he has spoken on before as well.This one just summarizes the broad ideas emerging so far. People can use it for their PPTs/research on the same topic.

Lessons are:

• In a globalizing world, decoupling does not work
• Global imbalances need to be redressed for the sake of global stability
• Global problems require global coordination
• Price stability and macroeconomic stability do not guarantee financial stability
•  Microprudential regulation and supervision need to be supplemented by macroprudential oversight
• Capital controls are not only unavoidable, but advisable in certain circumstances
• Economics is not physics
• Having a sense of economic history is important to prevent and resolve financial crises

He misses one critical lesson. Importance of fiscal prudence in good times. So you have enough funds to spend in bad times. India ran loose fiscal policies in both good and bad times.  May be he gave it a miss as India just does not learn this lesson……

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