The wisdom of GM Rogoff

Rogoff: The Exuberance of India
January 31, 2009, 10:50 am

(Grandmaster) Kenneth S. Rogoff, a professor at Harvard University and former chief economist of the International Monetary Fund, is offering updates on his experience at this year’s World Economic Forum as a guest blogger on Davos Diary.

By far the chirpiest gathering I attended in Davos was on my last night at a private dinner populated largely by top Indian journalists, senior policymakers, and leading Indian businesspeople. Of course, people were very excited about the academy award nominations for “Slumdog Millionaire,” not to mention the stellar presence at Davos of World Chess champion Vishy Anand (who recently defeated Russia’s Vladimir Kramnik to cement his title).

But the real reason my Indian companions were so cheerful was a strong sense of relief that they were living far from the epicenter of the recession, insulated by their country’s size and still-comparatively stringent restrictions on international capital flows. “Thank heavens for the strong regulatory framework we have in our financial system,” one leading provider of soft consumer goods said.

Of course, many outside commentators view India’s financial regulation as repressive, effectively forcing banks to hold massive quantities of government debt. Of course, given how many of the United States financial institutions are doing that voluntarily right now, and that the U.S. public-debt-to-GDP ratio may rival India’s in a few years (according to Reinhart and Rogoff’s research), there are fewer critiques coming from abroad right now.

Walking around the room and polling quite a few people, I came up with a “Davos India dinner consensus” forecast of 6 percent to 7 percent for India’s 2009 growth, a remarkable figure in a year where the most developed countries are expected to have negative growth, and where world growth will struggle to reach 1 percent.

Here is the full article.

PS: I was bummed that I did not find out that world chess champion Vishy Anand was around until too late — at the India dinner — but happily got to congratulate him on the phone. I retired from high-level chess decades ago, and had never met him. Vishy politely claimed he had played over some of my games in Chess Informator when he was a kid; he is famous for having a prodigious memory.