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Emerging Markets

Rajan: EMs need to step up to stop deglobalisation, tackle climate change

Rajan, Raghuram in 2004 from Alamy 17Oct22 575x375

Former Indian central bank governor Raghuram Rajan tells GlobalMarkets that emerging markets must turn their climate change rhetoric into action rather than simply carp from the sidelines

Emerging market countries that want to play a serious role in the global world order need to “show some creativity” and articulate clearly their agenda and vision for the future, rather than simply adding more “platitudes” to the conversations, said Raghuram Rajan, a former governor of the Reserve Bank of India.

Speaking exclusively to GlobalMarkets this week, Rajan said countries such as China and India kept insisting that they wanted to create a new multilateral order but tended to fall short on their promises.

“They need to show some creativity and start creating an agenda,” said Rajan, who is now a professor at the University of Chicago Booth School of Business. “What is India doing as it takes the leadership of the G20? Does it have a serious climate plan for the world? Does it have a way of stopping the deglobalisation that is happening?

“Emerging markets that want a serious role in the world have to come to the table with their thoughts, their views and their vision for the world, rather than simply saying no to what the Western alliance puts forward.”

This is critical, given the rising potential in emerging markets. In late June, S&P Global Ratings raised its 2022 growth forecast for European, Middle East and Africa emerging markets by 1.1 percentage points to 4.7%. For Asian emerging markets, growth is forecast to be 4.6% this year.

In comparison, the US and eurozone growth for the year is expected to come in at 2.2% and 2.6%, respectively.

Despite China’s GDP coming under pressure due to its zero-Covid policy, tight border controls and pandemic restrictions still in place, it is also expected to record growth of 3.3% this year. This means the role these major markets and regions play in global multilateral circles is of importance, Rajan said.