Mumbai, 1 June-2014(PTI): Ahead of monetary policy review on Tuesday, Reserve Bank of India (RBI)…
Mumbai: Speaking at the convocation ceremony at IIT Delhi, Reserve Bank of India governor Raghuram Rajan said that the tradition of debate and an open spirit is critical for India’s economic progress.
Against the backdrop of growing intolerance in the wake of Dadri lynching and subsequent acts of violence, he also said protection of right to question and challenge was essential for India to grow.
This is not the first time that Rajan has lashed out at the government and the economic situation in the country. He has taken a stand and done so whenever deemed necessary.
Finance Minister Arun Jaitley and Chief Economic Advisor Arvind Subramanian called the China- led slowdown of the world economy as opportunity for India to grow.
Jaitley said that India can replace China as a driver of global growth and Subramanian said that China slowdown is a historic opportunity for India to relaunch growth in India.
On the contrary Raghuram Rajan said that it will be a “long time” before India can replace China as a growth engine for global economy even before it grows at a faster rate.
At a time when everyone chose to concentrate on the mere numbers stating that India is growing at a faster pace than China, Rajan clarified, “India is one-fourth to one-fifth of China’s size. Even if we can overtake China in terms of growth rates, the magnitude of the effect will be far smaller for a long time to come.”
Recently, when the markets were crashing on China’s rout, Rajan hinted that Reserve Bank’s intervention can do more harm than good. He showed his concern over overburdening central bank to fix struggling economy.
He further added, “Don’t keep asking us to do more because at some point we get into territory where the consequences may be more bad than good if we actually act.”
When slowdown struck the real estate market, with unsold inventory piling up to a 48 month high, real estate players started batting for a rate cut.
Rajan came out and asked asked them to cut prices instead of depending on the central bank to do so.
He said, “I do believe that if real estate developers who are sitting on unsold stocks bring down prices, that will be a very great help to the sector because once there is a sense that prices have stabilised, more people will be willing to buy.”
Earlier this year Rajan cautioned the government against putting too much faith in exports through its ‘Make in India’ policy when he was chided by senior BJP members for his tough stance on interest rates.
Rajan always stuck to an inflation-focussed policy regime from the time he took over the role as the governor of the Reserve Bank of India. He trashed wholesale price index (WPI) as its key indicator on inflation and adopted consumer price index (CPI) which showed his upfront intention and his willingness to tackle tough problems.