Reserve Bank of India (RBI) Governor Raghuram Rajan has received the fifth Deutsche Bank prize for Financial Economics 2013, in recognition of his ground-breaking research work which has influenced financial and macro-economic policies around the world.
The new RBI chief while talking to reporters questioned the efficacy of ultra-low interest rate in dealing with the economic problems.
Rajan said he didn't have the answers but said it was time to ask, "are ultra low rates the solution or part of the problem?"
Low rates can prompt banks and financial institutions to invest but the RBI chief said that it was doubtful whether this is leading to an increase in new businesses.
"There may be no connection or only a limited one, if uncertainty holds back investment," Rajan said, adding that "(low rates) do create financial system stresses which could set the stage for another crisis."
Asked about RBI's policy stance, Rajan said: "At this point we are neutral, we will see how things develop."
"Unfortunately there is still some inflation when you strip out the effects of food and energy. Therefore, it is not just food, it's other factors also which are driving inflation," the RBI Governor said.
While presenting the prize to Rajan, Deutsche Bank co-chairman Juergen Fitschen yesterday had said that it would have been hard to find a more deserving winner for this year's award.
The academic prize is sponsored by the Deutsche Bank Donation Fund and carries an endowment of euro 50,000. The Centre for Financial Studies (CFS) awards the prize bi-annually in partnership with Goethe University Frankfurt.
