Meeting Mr. Vivek Moorthy

Yesterday, we went IIMB for some Panel Discussion. It was very good experience to listen to such an experienced people from various fields like Economics, IT, banking, SME, Marketing & etc. In that I happen to meet Mr. Vivek Moorthy, IIMB faculty. Before proceeding with my posting topic, I would like give brief intro about the Mr. Moorthy. Prior to IIMB faculty, he was the Consultant to Mr. Y.V. Reddy, Governor RBI on interest rates and prior to that, and chief economist in Federal Reserve Bank of New York. For more information you can log on to IIMB faculty website.

Now today’s my topic of posting is, my very short discussion with Mr. Moorthy. I would like to post it like “conversation” only. Before that, Mr. Moorthy told in the panel discussion that Stimulus Package is not necessary now! So when I met him off the stage after the Panel Discussion was over, our discussion went like this…

Me: Sir, I have doubt on your suggestion about stimulus package. I think we need fiscal stimulus packages. Even Keynes said this only. I do agree that stimulus package implementation is more important than the package itself. Leave our country. What do you say about Japan? Japan’s Nikkei peaked to 40000 levels in 1989 and after that it is not retrace it back. It means from 90s onwards Japan is in depression even after their monetary stimulus by maintaining almost ZERO interest levels. I think they need fiscal stimulus package.

Mr. Moorthy: India & Japan are altogether different countries. First talking about India, government has already announced 2 stimulus packages in addition to monetary stimulus. Government cant afford to go more fiscal deficit than this.

And about Japan, its growth has been saturated. Prior 1989, it has grown enormously for long term. Now it is saturated. And that’s what is indicating Nikkei.

And about India, interest rates are coming down, money should rotate in economy and business cycle will reverse.

Me: Sir, about interest rate I don’t think they have become cheap. Still they are high only. And due to reverse repo rate banks are keeping amount with RBI for less risk & better returns instead of taking the risk of lending. Friday banks kept nearly 40000 crores with RBI through Reverse repo route.

And about the business cycle, what about Japan? There is not at all turn around the in that case from last 20 years. There is no cycle at in Japan!

Mr. Moorthy: I do believe repo & reverse repo should be reduced & should be lower than 2%.

And about Japan, as I said, Japan witnessed robust growth from 1969 to 1989, 20 years growth period. Now 20 years of slowdown.

And there are lot of factors in India we need to take care along with interest rates & fiscal stimulus.

Since he was in hurry & we were also to return back to college, this was brief stint with Mr. Moorthy.