‘Financial Leadership of the West has Failed Us’

Subbarao says West's so-called innovations have caused the 2nd global crisis

RBI governor Duvvuri Subbarao blamed the financial leaders of the West for letting the so-called innovations cause the second global crisis in less than three years even as European leaders scramble to fix the twoyear-old sovereign troubles. 
"There is a vacuum in financial leadership globally," Subbarao said on Friday in Kolkata at a CII leadership summit. "They lacked foresight to see problems of financial innovations. We have gone through one crisis, and I am scared of saying we are going through another." 
Nearly two years after Euro leaders started to contain the debt turmoil, their fifth effort led to the creation of $267-billion warchest and evolved rules to curb recurrence of the fiscal mess. They advanced the beginning of an €500-billion rescue fund to next year and scrapped the demand that bondholders share losses in sovereign rescues. These troubles in the global financial markets pose challenges to local financial stability. But despite the pressures of financial meltdown, he may stick to taming the inflation priority, over slowing economic growth. "I am sensitive to difficulties faced by the corporate sector, because of high interest rate and unfavourable exchange rate. I am also sensitive to poor people who are hurt by inflation," he said at the inaugural session of the two-day event, organised jointly by CII and Suresh Neotia Centre of Excellence for Leadership. 
The rupee has depreciated over 14% since early August due to global destabilising factors and the governor said the fall in local currency has put additional pressure on inflation, which still remained high despite RBI's policy of monetary squeezing.