Notes from Raghuram Rajan's talk

The UChicago BSchool professor who was Chief Economist at the IMF for a few years, and gained prominence recently for having 'predicted' the financial meltdown talked at Bangalore today, mostly about the root causes of the meltdown and also about India. The main talk did not resonate much with me but a few points that did:

* India will be the 2nd or 3rd largest economy in the world in a couple of years he said (I think he must have meant 4th, or else he was referring to many more years than just a couple). Do we have the thinking going on that would be needed for a country with that clout ? Like geopolitical thinking ; what should be our policy towards different countries/blocs, towards Africa ? A country like the US has a whole bunch of people discussing and debating these kind of things, and finally it crystallises into policy. Absolutely I agree -- there is a complete lack of depth in thinking about all the many areas of a complex industrialized (post industrialized) society. (Now this is where I step in ...)
* He felt that land/real estate has become a stumbling block for India's growth. Like if you have land or control of land then you can make money and if you don't, you don't. There is lot of lack of trasparency and distortion in land ; political people influence things unfairly, who you know matters. He also cited POSCO which has been trying for a long time to get land for its plant in Orissa. While I don't agree with the POSCO example (there is a lot of popular resistance to this from the local people), I agree completely to the broader point. When I see all the building construction in the cities of India, it gives me a very uneasy feeling. I've tried to analyse this and usually conclude that putting up such large buildings feels such a complex business and requires so much financing, that it makes me feel very small in comparison. But now I think the kind of thing Rajan was talking about also feeds into it ; the whole business of real estate is so opaque and criminalized and common people feel completely helpless in front of the forces involved. This shouldn't be.

* He pointed to UID and cash transfers (apparently being proposed) as critical pieces to stem the massive leakage and put more power in peoples' hands.

*Government's role need not be as a service provider per se. in areas like education and healthcare, the critical thing is that govt. plays a transparent regulatory role, so that whoever is delivering the service is constrainted to deliver a certain quality.