Better growth in coalition governments: Former RBI governor YV Reddy
ET Bureau & Agencies|
Updated: Sep 29, 2017, 12.47 AM IST
NEW DELHI | WASHINGTON: A coalition government that produced consensus on policy-making was probably better than the one with a majority as far as economic growth was concerned, former RBI governor YV Reddy has said.
Since economic liberalisation, beginning 1991 under the premiership of Narasimha Rao, India’s GDP growth rate was the highest in fiscal 2007, when it touched 9.6%, under the UPA led by Manmohan Singh. Under the new series, GDP grew 10.55% in FY2010. The previous highest growth rate of 10.2% in fiscal 1989 was recorded under Rajiv Gandhi’s tenure, data from the Central Statistics Office revealed.
“Interestingly, the highest growth in India from 1990 to 2014 was really during coalition governments,’’ Reddy told an audience in Washington. “So, in a way it is consensus based...in Indian situation, a coalition probably produces better economic results than a strong government,” he said.
To buttress his argument about the benefits of a coalition government, Reddy said the administration handled the 1991 currency crisis well, of which he was part as a bureaucrat. “The remarkable thing was that despite an unstable political situation, they managed a political consensus for whatever was needed to manage it successfully,’’ said Reddy.
Speaking at the Hudson Institute, a top American think- tank, Reddy, who was RBI governor from 2003 to 2008, said the Global Financial Crisis of 2008 is still not over. “In the short term definitely things are better, but in the medium term there is a question mark,” he said.
“I think significant changes I see in the next 10 years in the geo-political situation. Now, in the process of globalisation of capital what has happened is many governments feel that their capacity in policy space to meet the expectations of the people is constrained by globalisation.” “Now, we are searching for a new balance between global and national, state and market, new balance between finance and non-finance.”
Since economic liberalisation, beginning 1991 under the premiership of Narasimha Rao, India’s GDP growth rate was the highest in fiscal 2007, when it touched 9.6%, under the UPA led by Manmohan Singh. Under the new series, GDP grew 10.55% in FY2010. The previous highest growth rate of 10.2% in fiscal 1989 was recorded under Rajiv Gandhi’s tenure, data from the Central Statistics Office revealed.
“Interestingly, the highest growth in India from 1990 to 2014 was really during coalition governments,’’ Reddy told an audience in Washington. “So, in a way it is consensus based...in Indian situation, a coalition probably produces better economic results than a strong government,” he said.
To buttress his argument about the benefits of a coalition government, Reddy said the administration handled the 1991 currency crisis well, of which he was part as a bureaucrat. “The remarkable thing was that despite an unstable political situation, they managed a political consensus for whatever was needed to manage it successfully,’’ said Reddy.
Speaking at the Hudson Institute, a top American think- tank, Reddy, who was RBI governor from 2003 to 2008, said the Global Financial Crisis of 2008 is still not over. “In the short term definitely things are better, but in the medium term there is a question mark,” he said.
“I think significant changes I see in the next 10 years in the geo-political situation. Now, in the process of globalisation of capital what has happened is many governments feel that their capacity in policy space to meet the expectations of the people is constrained by globalisation.” “Now, we are searching for a new balance between global and national, state and market, new balance between finance and non-finance.”
