A week after gross domestic product growth touched a three-year low of 5.7 per cent in June, the lowest in the Narendra Modi government’s tenure, former Reserve Bank of India governor Raghuram Rajan said the Centre should focus on the levers it has control over — namely infrastructure, power, and exports — to boost growth.
“Let us focus on things we have control over. Let us ensure that the infrastructure we have built actually gets completed. That is a lever that the government can push harder. Can we solve impediments like land acquisition, given the political capital this government has?” Rajan said at the launch of his new book I Do What I Do in New Delhi on Thursday.
The former RBI governor was asked about the three things he would advise the finance minister to focus on for higher growth. “The second area is power,” he said. “In a country supposed to have surplus generation capacity, why do we have large areas without 24/7 power? We also have generation companies which cannot sell that power. That is because we have highly indebted distribution companies whose books are still unhealthy.
“The third is exports. Exports from Asia are picking up. Why cannot we build that up? Can we start building the required logistics chain and infrastructure? Can we boost export promotion? After all, that was what Make in India was about.”
On if there was more he could have done to oppose demonetisation, announced on November 8, as he was the central banker till September, he said the RBI’s powers were ambiguous on such issues. “Is it an issue on which the RBI can say no, and say over my dead body? The answer to that is quite ambiguous. Given what happened in the 1978 demonetisation, the government can get an ordinance. The legal sense we got was that the RBI is not needed for such an action.”
He said he had taken along Indian currency to the US, after his RBI stint, and had to come back to change that back into valid currency notes.
Rajan also said an open, tolerant society is more prosperous than an authoritarian one. “Every authoritarian regime comes to a turning point when it asks how do we become a more high-growth economy? The answer is, by turning more liberal.” India is not moving towards being a less tolerant society. There were threats, however, and the country needs to be more vigilant, he said. “It is our greatest strength that we are a tolerant, open society accepting different viewpoints, religions, cultures. It will be, in the future, our greatest economic strength. Because as we move towards a service, idea-based, invention-based economy, you need that kind of society.”
On if he would be willing to return to India, Rajan said: "Yeah, if called upon...and if there is a place where you can make a big difference, of course."