West needs emerging economies: Rajan

Davos: Former RBI Governor Raghuram Rajan on Tuesday said the Western world must realise they cannot go a long way without the help of the emerging economies and warned that no one would be able to resolve any problem of a 'fractured world' if things are not set right soon.

Without naming any country, he said the West must realise that their population is ageing and the demand for their products would mostly come from the emerging world. Speaking at a session of the World Economic Forum (WEF) Annual Meeting, Rajan said there is a risk that by the time the West goes to the emerging world for their support, they may have to answer quite a few questions about why they did not share the benefits earlier.

He warned that the approach of the Western world must change soon for the good, or else there may be a chance that we are not able to solve any of the problems of the 'fractured world'. About issues facing the Western world, he listed technology, ageing population and climate change.

Rajan was speaking at a session on the power of economic narratives and how policymakers can address the challenges of the 21st century. He said some governments such as Singapore have done something to address the problems arising out of income inequality and the divisions in the society by setting up housing projects where middle class and lower middle-class families can live together.

Rajan said he's not sure about the US but some countries are doing things in this area and certainly the governments can play a role here. The Chicago University professor is known for his frank views on various economic and monetary policy matters and is credited with having predicted the global financial crisis of 2007.