"I do want to point out difficulty of having decision taken at the centre, when the centre does not know what is happening in much of the country. Take for example, the Indian decision to essentially close down.
"...you soon found that some areas which did not had many coronavirus
infections were actually suffering economically so the entire national lockdown
had to be withdrawn perhaps too early in some places," Rajan said in an interview with CoronaNomics.
CoronaNomics is a Youtube channel where the world's top economic experts discuss how to tackle the economic impact of coronavirus.
He also pointed out that Mumbai and Delhi were at the centre of infections when nationwide lockdown
was announced but some areas of northeast did not have many infections at the time.
Rajan, who is currently a Professor of Finance at The University of Chicago Booth School of Business, said what decentralisation does is, it allows locals to address the problem, while of course it is being helped by the central government.
The economist also said that in many Indian cities, one of the problems is the mayor in the city are largely disempowered, and because they are disempowered, the public services in the city tend to be neglected.
Replying to a query whether the Bank of England's mandate should be changed from targeting inflation to targeting GDP growth, Rajan said the old problem of central bankers was how to keep inflation down.
"That was a problem in 70s, 80s and 90s. Unfortunately, the central banks have seemed to have succeeded in keeping inflation down.
"Now the problem is inflation is too low, how do we get it up is specially in a world with enormous debts contracted during the pandemic," he noted.
He, however, said a little bit of inflation helps, and added that "My own preference is lets try and figure out what else we can do to elevate growth rather than relying on monetary policy magic".
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