Former Reserve Bank of India (RBI) Governor Raghuram Rajan has said that he is not quite sure about government's 'Atma Nirbhar Bharat' initiative. Rajan said he is not clear what government means by 'Atma Nirbhar Bharat', adding that if it is about creating an environment for production then it is a rebranding of the 'Make in India' initiative.
Rajan asserted that India needs world-class manufacturing and that means the country's manufacturers need access to cheap imports that form the basis for strong exports.
The Indian economist expressed concern that the Atma Nirbhar Bharat campaign should not result in protectionism as such policies have never worked in the past. "We had a licence permit raj earlier...that protectionism was problematic, it enriched a few corporations but basically was a source of poverty for many of us," he said.
Rajan, currently a professor at the University of Chicago said the country needs to create infrastructural and logistic support to become part of the global chain. He stressed that India needs to work very hard in its education sector.
Rajan was addressing a virtual event organised by the economic think tank Indian Council for Research on International Economic Relations (ICRIER).
On monetisation of the deficit by the RBI, the eminent economist said, "What central banks can do is in the very short run use their balance sheet to intermediate between banks and the government. So, if the Centre needs to place a lot of government paper in the short run, the central bank can absorb it on its balance sheet". Monetisation of deficit happens when the central bank directly buys government securities from the primary market and in turn prints more money, thereby helping bridge the fiscal deficit.Rajan further said what really matters is the quality of country's finances. "In India's case it would be, for example, adopt a debt target and put in place legislation which shows that you will move towards the debt target". He further recommended to "Appoint an independent fiscal commission that will look at the budgets and notify about lack of transparency".