Raghuram Rajan's Insights on Currency Crises and Economic Growth

Former Reserve Bank governor Raghuram Rajan attributes the Indian rupee's fall to a strong US dollar, advising caution with RBI interventions that could harm exports. He highlights the effects of US policies on global economies, stresses job creation, and suggests policy focus on sustainable growth through investments and increased household consumption.

Raghuram Rajan, the former governor of India's Reserve Bank, attributes the declining value of the Indian rupee primarily to a strengthening US dollar, advising against any hasty intervention by the RBI that could potentially damage Indian exports. His recommendation to policymakers includes a focus on job creation and boosting household consumption to counter the economic impact.

Discussing the implications of US President Donald Trump's second term, Rajan expresses uncertainty for both the global and Indian economies, noting ongoing policy actions on immigration, trade, and tariffs. He explains that a strengthening dollar is partly a result of fear-driven tariffs aimed at reducing US imports and narrowing deficits.

Rajan points out that the United States, due to economic growth and investment opportunities, becomes more attractive, drawing capital inflows that bolster the stock market and the dollar. He emphasizes the need for India to stimulate private investment and consumption to create sustainable growth, underscoring household demand as pivotal to fueling this cycle.

(With inputs from agencies.)