Rich countries are now turning their backs on free trade, says RBI chief Rajan

The Green Batti Project is an initiative to bring together young professionals mentor underprivileged kids and help them ideas, life and social skills, financial literacy and exposure to technology. Dr Raghuram Rajan, governor, Reserve Bank of India (RBI), gave a freewheeling talk to the mentors of The Green Batti Project in Mumbai on Wednesday February 18, 2015. The governor, acting as the mentor to the mentees spoke about issues ranging from India's importance in the globalised world to the possible reasons for his Rhodes scholarship rejection. Excerpts from his talk: 

...On his worries with the rich nations

"My worry across the world is that the large rich countries are now turning their backs on globalisation. They are turning their backs on free trade. They are turning their backs on flow of capital. And for a country like ours which is so dependent on importing commodities like oil and coal, we have to keep global trade channels open," Rajan said. 

...On 'Make In India'
Rajan said that to have an open world and having free interchange is extremely important especially if we emphasise on Make In India, we need to export more to the rest of the world. 

"So, we have to be global citizens but we have to make sure that the rest of the world also stays global. And, therefore, we will have an increasingly important role to play. That is why, all of you are important. You are part of this new India which will not only remake India hopefully but also remake the world not so much in the old traditional image but with new ideas, new thoughts, new agendas," he said. 

....India-US talks no more mere lip-service
"Just last week we had India-US dialogue. Secretary Lew had come over and they were very serious about working with India as a partner. Not so much of a lip service of the past. But we are getting closer to the level where are really important. I think not quite yet maybe in the next three to five years if we do what is right, we cannot be ignored. And you would be our representatives as we become more of a global player and you have to have the right attitude," he said. 

...The road ahead for India
"Clearly, over the next few years the most important thing to do for economic policymakers from India's perspective is to create jobs," Rajan said. "Good jobs, jobs that will essentially help you realise your full potential. But also jobs for people you are talking to (mentees) and hopefully the difference between your jobs and their jobs will not be that great with them coming up to your level rather you going down to where they would have aspired for without your support," he said.  

...Why are the youth so important in India today?
"Well, the first reason is that there are so many of you. As you know, we are one of the youngest countries in the world. There are significantly more people under 28 than above 28 years of age. And, you are our future. Now, what do you bring to the table?" he asked.

Rajan said, "I think when I see young people today, I am thoroughly energised because I see people who are fearless. Who don't have the old worries, constraints and prejudices that people in my generation and older generations had." He said that the youth today have open minds. "You are so often on Facebook, Twitter, the internet. You are global citizens already. Some of you without having to set a foot abroad but still you know what's going on in the rest of the world, you are comfortable with it and you can handle that. That is important because many of you will be dealing with the globalised world in which India no longer is a bit player but in fact an important player whose views are taken seriously," he said.  

...India needs to start setting global agenda

"One of the things I have been trying to push very hard, both at the RBI and also in the government is that we need the capacity to start setting global agendas," Rajan told the gathering. 

He said, "So far what we have been doing is reactive. The G7 sets an agenda and we say this is against developing countries and emerging markets, so do something else.  But, we haven't been setting the agenda ourselves. Increasingly, we need the intellectual capital, we need the confidence to put those ideas on the table and say, 'guys react to this' and we are not going to be the only guys reacting, you have to start thinking of our ideas. This will take time but this is something we need to work on and I would encourage many of you who have the interest to start thinking about careers in policy institutions," he said. 

...On why is it important for everybody to have a chance? 
"The standard answer is that it is morally right, it is the right thing to do and equity is good. But I think equity is good not just because it is morally right but because it is also an economic imperative and in self interest of people like you and me. And why do I say that? Think of the two big things we have going for us today. One is that we are a democracy. We are very vibrant democracy. But at the end of it all, we are a very fertile democracy. So that is one of our great strengths. It's something that many countries at our per capita level of income don't have. It is something that we should be thankful for that we have inherited. But the second thing which is less noticed and equally important is entrepreneurship. The free markets that we have in India. Largely free, getting freer all the time and I think they have gotten freer as people have grown a little richer, a little more educated," Rajan said. 

...On democracy and free market
"Now, often don't make a link between democracy and free markets. They think they are two separate things. But if you look at the rich countries of the world you will find that for the most part, not only they have largely free markets but they also have democracies. And the question is that is there a link between the two? I would argue that there is a link, because to some extent free markets and democracies are about open systems, competition, but there is also a deeper underpinning that people in democracies are willing to support free markets that allow some people to get rich," Rajan said. 

...On the old industrialists and the new entrepreneurs

"I think there is a difference between our old industrialists and our new entrepreneurs. For old industrialists,  government is the boss and they were very hesitant to speak out against the government. The new industrialists are much more willing. I think that is also because older industrialists were more linked to the policies of the government because the government had much more sway over them and therefore not much independent checks and balances on the government. But today, these young guys who made it on their own, they have done everything without necessarily a huge amount of government's support," he said.  

"In this way, I think, both democracy supports entrepreneurship and free markets and entrepreneurship and free markets supports democracy," Rajan told. 

...His Rhodes scholarship interview 

"I remember going to an interview for Rhodes scholarship. I went for that interview wearing socks not matching with the black suit and black shoes. I didn't realise that, you know, wearing socks that didn't match your attire was not appropriate for this kind of interview. And my guess if they were kind people they would look past these socks," Rajan joked. 

On a lighter note, Governor Rajan said, "but since I didn't make it through the interview I guess I can attribute it to the socks than to my lack of learning or accomplishments." 

"But the point I am trying to make is that there are so many things that are so important. They way people dress, the way they portray themselves, showing up for an interview on time, being appropriately respectful but not overly," he emphasised. Talking about the role of young professionals as mentors to underprivileged kids, Rajan said, "But people coming from a different strata who don't know these things, for them to, say, get past a job interview, knowing some of these basic stuff might be important."