Tag Archives: raghuram rajan

Modi showcases newly muscular Indian foreign policy


Indian prime minister Narendra Modi took power less than five months ago, but he’s already made five major world visits, including to Japan, to the BRICS summit in Brazil and this week, Modi is sweeping through an action-packed five-day visit to the United States.India Flag Icon

His current visit to New York and Washington has the air of triumph about it, and his speech to nearly 19,000 fans at Madison Square Garden certainly marks one of the very few times that a foreign leader has drawn such genuine support from an American audience. It’s all the more amazing, given that for much of the last decade, the US government refused Modi a visa to travel to the United States, due to his questionable role in the 2002 Hindu-Muslim riots, which took place four months after Modi became the chief minister of Gujarat state.

India’s foreign relations with major world powers like the United States, Russia and China aren’t always easy, and its relationships with other south Asian neighbors, especially Pakistan, can often be downright frosty.

Nevertheless, there are at least two reasons why Modi has such a strong opportunity to maximize India’s role on the world stage today — and none of it has to do with India’s economy, which is growing far slower than it needs to sustain truly transformational gains.

The first is the world’s growing multipolarity, which must seem especially multipolar from New Delhi’s view. Neighboring China is poised to become the world’s largest economy within a decade. India also has longstanding ties with Russia dating to the Soviet era that are now especially relevant as Russian president Vladimir Putin reasserts his country’s might in its ‘near-abroad.’ That makes cooperation with India, the world’s second-most populous country, a strategic advantage for any major power, and it gives India considerable leverage.

The second is the nature of Modi’s election in May. With 336 seats in the Lok Sabha (लोक सभा), the lower house of the Indian parliament, Modi’s Bharatiya Janata Party (the BJP, भारतीय जनता पार्टी) has the strongest majority and boldest mandate than any Indian government since 1984. While no one knows whether Modi can use that strength to revitalize India’s public sector and institute reforms to boost its private sector, the magnitude of his victory forced the world to take notice. If, as Modi promises, he can introduce robust economic reforms, a more liberalized Indian economy could birth a lucrative market of over 1.25 billion consumers, especially if Modi can lift India’s poor into a middle-class standard of living.


When Modi appointed Sushma Swaraj (pictured above earlier today with Modi, former US president Bill Clinton and former US secretary of state Hillary Clinton), the former leader of the Lok Sabha, as India’s new external affairs minister, it was a gesture of respect for an ally of the BJP old-guard leaders, such as LK Advani, who have largely been pushed aside in the Modi era. But it should have also been a sign that Modi, known for his micromanaging style, would take a hands-on approach to foreign policy.

Given the emphasis that Modi placed on good governance and economic reform, it might be surprising that he’s spent so much time in his first five months on international relations. Modi has so far been cautious on economic policy — for example, his first budget in July featured far more continuity than rupture, disappointing some of his booster.

So what do five months of Modi’s foreign policy tell us about what we might expect over the next five years?

Plenty — especially on the basis of his international efforts as Gujarat’s 13-year chief minister.

Here’s a look at how Modi’s efforts in reaching out to five other global powers already provide strong hints to the Indian prime minister’s worldview, and how we might expect India to engage the rest of the world for the foreseeable future. Continue reading Modi showcases newly muscular Indian foreign policy

Why Stanley Fischer is such an inspired choice as US Fed vice chair


It’s really quite incredible that there’s been more ink spilled over the decision of the American Studies Association, a US-based academic group, to boycott Israel than the potential nomination of Stanley Fischer, the former governor of the Bank of Israel, to become the next vice chair of the US Federal Reserve.ISrel Flag IconUSflag

It’s somewhat ironic that at a time when many critics are attacking the ASA’s decision (is it morally right to boycott the exchange of ideas, academic debate and discussion?), Fischer’s transition from Israeli central banker to US central banker would be a spectacular opportunity — for Fischer, for the Fed, for Israel, for the United States and, if the initial reaction holds, world markets, too.  Reuters reported late last week that Fischer was offered the spot, though there’s not been an official announcement.

Janet Yellen, the current Fed vice chair, is US president Barack Obama’s nominee to chair the Fed after Ben Bernanke completes his second term on January 31, 2014, and she is expected to be confirmed as the new Fed chair by the US Senate in a vote later this week.

Fischer, as the number-two official at the Fed, would bring with him eight years of experience setting monetary policy for Israel and the rock-star status of one of the world’s most accomplished economists.  As a longtime professor at the Massachusetts Institute of Technology, he not only served as thesis supervisor to Bernanke, the current Fed chair, but also Mario Draghi, the chair of the European Central Bank.

As The Financial Times reported last week, Fischer has a ‘dream resumé’ for the position, topped off by an eight-year stint as Israel’s central bank governor that is universally acclaimed:

Some clues to how Mr Fischer thinks about monetary policy come from his tenure as governor of the Bank of Israel. He was one of the country’s most respected public figures; when he announced he would be stepping down earlier this year, one commentator said the country was losing its last ”responsible adult”.

His eight years as governor coincided with fast economic growth, low unemployment – currently 6 per cent – and low inflation. Israel survived the financial crisis in 2008-9 without seeing a single bank collapse.  Unlike his predecessor Jacob Frenkel, who had a tight focus on fighting inflation, Mr Fischer is credited with broadening the Bank of Israel’s remit to influence growth and employment. His decisions were marked by pragmatism: he slashed interest rates in the wake of the financial crisis, then abandoned economic dogma to try to hold down Israel’s currency, before raising rates as the economy recovered.

Fischer was so successful in stabilizing Israel’s economy that the Bank of Israel was already raising interest rates by September 2009 — if it hadn’t been for his age (he’s 70 today), he would have been a strong candidate to succeed Dominique Strauss-Kahn as managing director of the International Monetary Fund in 2011.

Born in what is today Zambia, Fischer spent his childhood there and in what is today Zimbabwe (and what was then the colonial apartheid state of southern Rhodesia).  Fischer first came to the United States in 1966 for his Ph.D in economics at MIT, and he remained there as a professor through 1988, when he took a position as the World Bank’s chief economist for two years.  From 1994 to 2001, he served as the first deputy managing director of the IMF during the Asian currency crisis of the late 1990s and other financial crises from Mexico to Argentina to Russia.  After a brief stint in the private sector with Citigroup, he was appointed governor of the Bank of Israel in 2005 by then-prime minister Ariel Sharon — and recommended by the finance minister at the time, Benjamin Netanyahu.  He holds dual Israeli and US citizenship, and he would have been as credible a candidate to lead the Fed as either Yellen or former treasury secretary Lawrence Summers.

As Dylan Matthews wrote earlier this year for The Washington Post, Netanyahu and Sharon took a big chance on Fischer, who wasn’t an Israeli citizen at the time of his nomination:

No matter — Fischer’s results were more than enough to assuage any doubts. No Western country weathered the 2008-09 financial crisis better. For only one quarter — the second of 2009 — did the Israeli economy shrink, by a puny annual rate of 0.2 percent. That same period, the U.S. economy shrank by an annual rate of 4.6 percent. Many countries, including Britain and Germany, fared even worse.

So what would his appointment mean for the Fed?  Continue reading Why Stanley Fischer is such an inspired choice as US Fed vice chair