Lack of leadership triggered Covid woes: Raghuram Rajan

INDIA's overwhelming surge of coronavirus infections has revealed complacency after last year's first wave, as well as a "lack of foresight, a lack of leadership," according to Raghuram Rajan, former governor of the Reserve Bank of India. "If you were careful, if you were cautious, you had to recognise that it wasn't done yet," Rajan said on Tuesday in a Bloomberg Television interview with Kathleen Hays. "Anybody paying attention to what was happening in the rest of the world, in Brazil for example, should have recognised the virus does come back and potentially in more virulent forms." India is suffering the world's worst outbreak of Covid-19 cases, with deaths hitting a record on Sunday and new cases above 3,50,000 daily. Pressure is building on Prime Minister Narendra Modi to impose strict lockdowns to stem its spread, a move his government has so far avoided after the economic devastation last year from a similar strategy.

After a drop in cases last year, "there was a sense that we had endured the worst the virus could give us and we had come through and it was time to open up, and that complacency hurt us," said Rajan, a former International Monetary Fund chief economist and now a professor of finance at University of Chicago.

India's relative success against the first wave of infections also likely led to it not swiftly preparing enough vaccines for its own population, he said. "Some of that may be the sense that we had time. That since we had dealt with the virus we could roll out the vaccination slowly," he said, adding that the government is now "getting its act together" and in "emergency mode."

Rajan, appointed by the previous government in 2013 to lead Reserve Bank of India, became an outspoken critic of Modi's administration after it took office during his tenure, spotlighting growing intolerance within the country as well as differing on the issue of RBI dividends and interest rates. Hindu nationalists, which form a large base of Modi's support, questioned his allegiance to India and accused him of keeping interest rates too high.

The RBI has been "as accommodative as possible" to support the economy in the face of stubborn inflationary pressures. As doubts build over the Indian economy's performance going forward, the RBI's "fairly large" foreign exchange reserves can offer "a measure of comfort for foreign investors."