The increasing alliance of India with the global economy is a big challenge as well as opportunity for the country as globalization is a double-edged sword, said D. Subbarao, Governer, Reserve Bank of India (RBI) on Friday while addressing the students of the Indian Institute of Management-Bangalore (IIM-B) at its 37th annual convocation.
"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," he said.
"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 added.
The stir in a non-tradable sector like housing proliferated into a global financial crisis and had also shown the negative aspects of the forces of globalisation that led to a destructive assessment of global growth and welfare.
Globlisation reduces barriers to flow of goods, money, people and ideas, cutting across national, linguistic, cultural and social boundaries and has brought India in the integration of the entire globe as never before. Subbarao 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 maximize its benefits and minimize its costs," he said.
Globalisation is a result of rapid technological advancements and economic liberalization across the world and this not something new as it’s going on from the 15th and 16th centuries and colonisation by the European powers in the following centuries. He added.
Throwing some light on the central bank's perspectives on globalisation, he added in a more integrated world, the RBI's monetary policy formulation had to consider with the developments across the world without having control over them.
"In 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," Subbarao said during his address.
In addition to that, IIM-B's board of governors chairman and Reliance Industries czar Mukesh Ambani and B-schools director Pankaj Chandra were also present at that occasion and spoke their words during the event.
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