There is a possibility that the Indian economy may slow down if a coalition government comes to power after the 2019 Lok Sabha election, said former Reserve Bank of India (RBI) Governor Raghuram Rajan. He was speaking to India Today TV in an exclusive interview on the sidelines of the World Economic Forum at Davos in Switzerland.
Raghuram Rajan said he is not a politician but speaks to politicians from all sides. Rajan dismissed the possibility of being India’s finance minister if the Congress is voted to power in 2019. “I am not a politician. These are just speculations,” he said.
Speaking about the Indian economy, Raghuram Rajan said the government needs to resolve the agricultural crisis in the country. “We have had a reasonable growth rate in the past five years. More jobs need to be created,” Rajan said.
He said though jobs are being created, the country suffers from underemployment.
On GST and demonetisation
When asked his views about the Goods and Services Tax (GST) introduced by the Narendra Modi-led NDA government, Raghuram Rajan said GST was a “positive step”.
However, he did not share the same opinion about the Modi government’s November 8, 2018 decision to demonetise Rs 1,000 and Rs 500 currency that were in circulation.
He termed demonetisation as a “setback”.
On RBI’s independence
Relations between the Reserve Bank of India and the central government soured in recent times. The RBI has been cautioning that any interference on its autonomy could have “catastrophic” impact on the country’s economy.
On December 10, 2018, in a surprise move the then RBI Governor Urjit Patel resigned after months of strained relations between the central bank and the Modi government.
Speaking to India Today TV, Raghuram Rajan said the resignation of Urjit Patel is a matter of “concern”. “RBI’s operational autonomy needs to be protected,” he said.
Rajan however said he had a “fulfilling” experience as RBI governor and declined that the RBI has offered him any fresh contract.
On challenges before Indian economy
In his interview to India Today TV, Raghuram Rajan said the country needs to create conducive environment for industries. “We need to create appropriate framework for development and re-energise private investment,” Rajan said.
“The best minister in the government should be given the responsibility of the human resource development ministry.”
On NPAs and banking reforms
The former RBI governor also spoke about mounting non-performing assets (NPA) of various public sector banks. He said the problem of NPAs is hanging over the banking system.
“We need to clean up NPAs and recapitalise them. Lending to bad business to keep them alive in the past was an issue.”
He said banking reforms in the country were “high jacked” by the bureaucracy. “Public sector banks need to be less politicised,” Rajan said.
Rajan said privatisation of national banks is also a possibility.