MUMBAI: When Raghuram Rajan warned about a looming financial market crisis a decade ago, former US Treasury Secretary Lawrence Summers said he was being ‘Luddite’. In the event, Rajan was right. Now the Reserve Bank of India governor is sounding the alarm again — the very efforts of central banks in the developed world to avoid another Great Depression by keeping interest rates at zero may lead to precisely that outcome.But this time around, there seem to be few dissenting voices. “I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth,” Rajan told an audience at the London Business School on Thursday. “And, I think it’s a problem for the world. It’s not just a problem for the industrial countries or emerging markets, now it’s a broader game.”The RBI Governor, although soaked in the free-market principles of the Chicago School, has been advocating against the unconventional monetary policies of the US Federal Reserve and the European Central Bank.Their zero lower-bound interest rates are distorting markets and countries are turning protectionist, which may require the IMF to take up the role of an international regulator.“We need rules of the game in order to effect a better solution,” the Press Trust of India cited him as saying. “I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action. I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action.”Despite rates at zero in developed economies from the US to the euro zone and Japan, economic growth remains anaemic and unemployment high. But the poor return on fixed-income securities has led to capital chasing yields into developing economies, pushing up the value of their currencies. To protect their competitiveness, some like India are intervening in markets and others suggest capital controls.Such actions and reactions by policy markets could lead to a situation similar to the 1930s when protectionist policies led to a compression in global trade and overall demand for products. It took decades for the world economy to recover.“The question is are we now moving into a territory in trying to produce growth out of nowhere or we are in fact shifting growth from each other, rather than creating growth,’’ said Rajan. “Of course, there is past history of this during the Great Depression when we got into competitive devaluation.”Rajan has in the past has been vocal about the need for IMF intervention. “The bottom line is that multilateral institutions like the IMF should re-examine the ‘rules of the game’ for responsible policy, and develop a consensus around new ones,” Rajan told an audience in New York on May 19. “No matter what a central bank’s domestic mandate, international responsibilities should not be ignored.”The governor, who has adopted a monetary policy framework along with the government, has been following conventional policies when it comes to central banking in India.He has been holding interest rates high to ensure that consumer prices, which have been running at double digits for years, are tamed once and for all, despite industry and investors pushing for cuts.“I try to shut out market reactions as far as I can,” Rajan said on market calls for interest rate cuts.“We (India) are still in a situation where we have to spur investment and I am worried more about that. So I shut out the asset-price reaction and think more about — is this going to bring bank lending rates down and therefore channel cheaper credit into firms and then they will invest. However, the issue gets much more complicated for other markets.”