Christine Lagarde, IMF chief, on a two-day visit to India, showered praise on Rahuram Rajan, the RBI Governor, on Tuesday, and said that it had been a colossus mistake on the part of the multilateral funding agency not paying heed to his prediction in 2005 of global credit crisis of 2008.
Rajan, who is presently the Reserve Bank of India Governor, served as the Chief Economist and Research Director at the IMF during the period 2003-2006, is credited with forecasting in 2005, an impending global economic crisis of 2008. He had made this prediction while addressing the annual meeting of the prominent bankers and economists at Jackson Hole in the US. Lagarde said that at that time nobody was imagining the situation likely to be in the near future. She described it as one of Rajan’s “many- many accomplishments”. She admitted the fault of the IMF in not paying due attention to his advice at that juncture.
Lagarde while addressing during an event organized by RBI and chaired by the RBI Governor, told that she and others now do not ignore anything said by Raghu. She said that the monetary policy of India “rests in good hands” and that Raghu had steered clear the Indian economy after the withdrawal of easy money policy by the US in 2013. She welcomed Rajan’s recent initiative of introducing flexible inflation targeting as the new process to conduct monetary policy.
Rajan’s 2005 prediction had invited scathing criticism from various international communities as it had come at a time when the investor community in the US had been basking in high growth.