India’s chief banking authority Dr. Duvvuri Subbarao, recently spoke at Cornell University and endorsed the concept of fiscal conservatism.

Writer Kushagra Aniket of the Cornell Insider has the scoop.

On Tuesday, Cornell had the unique privilege of hosting Dr. Duvvuri Subbarao, Governor of the Reserve Bank of India (RBI) who presented a talk entitled “India in a Globalized World: Some Policy Dilemmas.”

The lecture was delivered as a part of the Mario Einaudi Center’s Foreign Policy Distinguished Speaker Series. Earlier in the day, Governor Subbarao also interacted with a selected group of students over lunch.

On both the occasions, Dr. Subbarao, who was appointed just a week before the 2008 Global Financial Crisis began, made a compelling case for the need for economic reforms, fiscal austerity, and capital investment for growth.

Subbarao traced the story of India’s growth from the early decades after independence when the country experienced what he called the “Hindu rate of growth”.

The phrase suggests that the Hindu philosophy of fatalism is detrimental to economic development. However, it would have been much more appropriate to term India’s modest growth rate under Prime Minister Nehru as the “Communist rate of growth” as India’s early policy makers were enamored by the socialist model of the Soviet Union. But due to a series of economic reforms after the Balance of Payments crisis of 1991, India experienced rapid economic growth driven by a high savings rate, increased productive capacity, and an unprecedented demographic dividend.

Nonetheless, India’s growth story started fraying after the global financial crisis of 2008. Today, India is undergoing a period of moderate growth, excessive and persistent inflation, and large deficits in the government budget and current account. With oil prices remaining high and external demand not picking up, the policy space to respond to these problems has been shrinking. Last year India suffered a 6.5% GDP growth rate, the lowest in the past 9 years. Earlier this year, Standard & Poor put India on a watch for a credit rating downgrade.