Bangalore - The increasing integration of India with the global economy poses a challenge and opportunity for the country as globalisation is a double-edged sword, Reserve Bank of India (RBI) governor D. Subbarao said late Friday.
"In a globalised world, the challenge for us is to accelerate growth and make it inclusive, as we are a poor country in terms of per capital income and other social indicators though we have a large economy at an aggregate level," Subbarao told business school graduates of the Indian Institute of Management-Bangalore (IIM-B) at its 37th annual convocation address.
"The global financial crisis of 2008-09 and the great recession that followed showed us the pitfalls of globalisation. But prior to the crisis, we have seen the benefits of globalisation with a steady growth in advanced economies and accelerating growth in emerging/developing economies with low/stable inflation all around," Subbarao recalled.
The bubble in a non-tradable sector like housing snowballed into a global financial crisis had also demonstrated the ferocity of the forces of globalisation as it took a devastating toll of global growth and welfare.
Noting that globalisation reduced barriers to flow of goods, money, people and ideas, cutting across national, linguistic, cultural and social boundaries and integrated India with the world more than ever before, the governor said globalisation comes with benefits and costs.
"No matter what career you pursue or where you choose to work, you will have to learn to manage globalisation in ways that will maximise its benefits and minimise its costs," Subbarao told the grads in his hour-long address.
Asserting that globalisation was inevitable due to rapid technological progress and growing embrace of economic liberalization by countries the world over, Subbarao said the phenomenon was not new as its history dated back to 15th and 16th centuries and colonisation by the European powers in the following centuries.
Sharing the central bankâs perspectives on globalisation, the governor said in a more integrated world, the RBIâs monetary policy formulation had to reckon with global developments without having control over them.
âIn contrast to the extreme positions some developed and developing countries had taken to face the challenges of globalsiation, we have opted for a middle path to let the exchange rate be market determined, but intervene to smooth excess volatility and/or to prevent disruptions to macro-economic stability,â Subbarao pointed out.
IIM-Bâs board of governors chairman and Reliance Industries czar Mukesh Ambani and B-schools director Pankaj Chandra also spoke on the occasion.