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Prime Minister Manmohan Singh is making a good-faith attempt to speak frankly about the crisis and send out the right signals about the administration's response. At a meeting with corporate CEOs on Monday, he said that India should gird itself for a global downturn, and made it clear that expected government expenditure would be sufficient to keep demand going. A similar positive move was the induction of Raghuram Rajan, an economist at the University of Chicago, as honorary economic adviser at the PMO. Getting Rajan on-board is useful in two ways: both in terms of immediate usefulness, and in terms of its systemic implications.
Immediately, it shows commitment to credit market reform.
Rajan, the author of the report that bears his name which lays out the roadmap for expansion of credit and credit histories across India to mobilise rural savings, came of age as an economist during the Southeast Asian currency crisis, and has served with the IMF. Crises, international governance and credit crunches are issues that have exercised him for years; as the IMF takes on a new role and the government prepares for the big summit in DC, thoughts of the sort he'll provide will be vital.