Like so many students, Raghuram Rajan is off to a new place and new challenges this month. But there is no time for acclimation. Rajan is taking over as the top central banker in India, and his to-do list leaves no room for delay. The rapid drop in the value of India's currency, the rupee, means that Rajan needs a clear plan to fight against rising inflation and falling growth. To get a sense of how he might approach the challenges ahead, The Guardian 's Heidi Moore suggests we look to a familiar beard face. Thanks to Ben Bernanke, we know the script: pour in stimulus, as fast as possible. Rajan is Bernanke disciple; Rajan's answer to the sharp slide of the rupee is, as Bernanke's was back in 2009, to open up the central bank's lending windows to free up the flow of money and welcome back foreign investors. What's ironic is that Rajan's and Bernanke's fates as economic policy-makers are tied up in other ways, reaching back years. Kurt Vonnegut, in his novel Cat's Cradle, wrote of the fictional religion Bokonism, which required of its adherents only belief. Vonnegut theorized that groups of people – dubbed a "karass" – would end up working toward a common purpose, unknown to themselves or each other, finding their lives intertwined without any knowledge of the goal they were working towards in common. The world's central bankers have become this karass, meeting and separating and meeting again to solve the quandary of economic crises – without knowing, really, what they are doing, or how it will end. The common threads are there. One paradox Rajan faces as the "Bernanke of India" is that it was Bernanke's relentless stimulus in the US from 2009 to 2012 that contributed to Rajan's current quandary of the falling rupee. As Wells Fargo strategist Sean Lynch noted this week, Bernanke's flood of money into the US financial system pushed interest rates down, forcing rich investors to look far afield for investments that would return some money. Many of them chose to put their money in India – which was a boon for the rupee and Indian trade balances. That was great when times were good and the stimulus was flowing. Over the past few months, however, the talk in the US has turned to cutting down on stimulus. Investors have been looking at returning their money to the US – which has hurt India. Rajan needs to lure that money back and keep it in India. Barclays predicts that Rajan's new plans for stimulus could bring back $10bn to Indian foreign-exchange inflows. Will it work? Rajan, in some ways, has a harder job than Bernanke. Bernanke just had to convince US investors to go along with his stimulus. Rajan has to stem a burgeoning global investment trend and lure foreign money. Read the full article here .
Filed under: ben bernanke, global business, bankers, growth, india, inflation, Guardian, emerging markets, raghuram rajan, central banks, rupee, Heidi Moore, government debt