Raghuram Rajan: Repo Rate Cuts Not a 'Magic Bullet' for Investments

Former Reserve Bank of India (RBI) Governor Raghuram Rajan has expressed skepticism about the efficacy of recent repo rate cuts by the central bank, arguing that such measures may not act as a 'magic bullet' to boost investments. During an interview with PTI Videos, he emphasized the role of other factors, including a transparent playing field and increased competition, in elevating investment levels.

Rajan highlighted that the interest rates are not excessively high, and the impact of the recent rate reductions will take time to materialize. He observed that the private sector's investment levels have significantly dropped, reaching an 11-year low, despite previous expansions in investment activity before the global financial crisis.

Discussing the role of inflation, Rajan advised more focus on core inflation rather than headline inflation. He also noted that foreign direct investment (FDI) should be targeted toward areas with good logistics and adequate workforce, suggesting that states in southern India are effectively attracting such investments.

(With inputs from agencies.)