India’s Fear of Growth

Aug. 9 (Bloomberg) -- Congratulations to India forappointing Raghuram Rajan as the new governor of its centralbank. It would be hard to think of anybody better qualified --not even Janet Yellen. But condolences to India for the newsthat monetary and financial policies aren’t the main obstaclesto its prosperity. The economy needs better management, allright, but not at the Reserve Bank of India.

Rajan, a former chief economist at the InternationalMonetary Fund and for many years a professor at the Universityof Chicago’s Booth School of Business, is justly celebrated inthe U.S. for sounding an alarm before the crash about thesystemic risks of financial innovation. His views were widelydismissed, but all too soon he was vindicated -- moredramatically than he could have wished. His book “Fault Lines”reflects at length on those lessons; it will be required readingfor many years.