Around the time Stanley Fischer became Bank of Israel Governor in May 2005, Israel had debt to GDP ratio of 100 per cent. Having been the International Monetary Fund’s first deputy managing director, Citigroup’s president and a chief economist at the World Bank, Fischer knew this wasn’t sustainable. Two and a half years on, Israel’s debt to GDP ratio is down to 80 per cent. Before he finishes his five-year tenure, Fischer is confident that Israel will be part of the 30-member elite country club Organisation for Economic Co-operation and Development (OECD). At a time when the Reserve Bank of India’s role in the economy is increasingly under scrutiny, Vikas Dhoot caught up with Fischer — two days after he called for the Bank of Israel to be freed from government control

•What are the key issues that Israel is looking to work with India on?

We are very interested in developing trade between the two countries, possibly through a Free Trade Agreement. On a big picture level, both India and Israel have to deal with rising capital inflows, though we have adopted different strategies to tackle them. We have a floating exchange rate, you have a flexible exchange rate. Inflation is a concern for both nations (both RBI and BoI refrained from cutting interest rates today). Our monetary policy issues are similar.

We can work together on financial sector reforms. Two very large banks dominated the financial system in Israel and they were forced to divest their non-banking assets like mutual funds and pension funds. It has been successful in terms of credit activities, but consumers still suffer from lack of competition.

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