Regulation helped India weather global financial crisis

The former governor of India's central bank--the Reserve Bank of India--comments in an interview:

Do you think that there is a case for revisiting globalisation today?

There are two aspects that have emerged recently. One is the future of globalisation and the other is the future of marketisation. These are interdependent but I would treat both of them as distinct aspects. Globalisation insofar as it related to trade in goods and services has had beneficial effects. But the distinction between globalisation in general and globalisation of the financial sector has come to the fore now. The key question now is how to manage the globalisation of finance so as to enhance the benefits while minimising its risks. Here we have a basic conflict between national regulation and global regulation. The problem with finance is it is footloose. There cannot be any rules of origin, it therefore becomes very difficult to have what you call circuit breakers.

The market orientation has helped significantly but two types of doubts have come. First, it has increased inequalities. Secondly, financialisation of markets — when markets became an end in themselves. That should not have been allowed. But I doubt whether there will be a fundamental review of the markets. Even in India, the marketisation of finance is the problem.

I agree with him that markets became an end in themselves. There are limits to what the markets can do for us.