Raghuram Rajan To Prannoy Roy On India's 3 Biggest Economic Problems

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Raghuram Rajan, the former RBI governor, spoke to NDTV’s Prannoy Roy.

New Delhi: 

Former Reserve Bank of India Governor Raghuram Rajan spoke to NDTV’s Prannoy Roy on a range of challenges in front of the Indian economy today. Dr Rajan said the three biggest problems for the Indian economy today are the agrarian distress, the ailing power sector and the crisis in the banking system. The 55-year-old economist, who was the first RBI governor to not seek a second term in nearly two decades after his tenure ended in 2016, said government interference in institutions could affect both global and domestic investment. Mr Rajan’s comments come amid a row between the central bank and the government over its autonomy.

Here are the live highlights of the interview with Raghuram Rajan:

 

“Given the controversies, it makes sense to have an external board to look at what’s been done.
I’m not a GDP expert but my sense is that we’ve gone backwards and forwards. Ultimately we have to have confidence. For the outside investor. And for policy decision,” Raghuram Rajan says.

“We need to have confidence on integrity of the data. The political controversies – nobody outside knows what’s happening. But there’s a tendency to believe the west. Need to build credibility for our statistics. There’s enough controversy to have somebody independent to look at it,” he adds.

On GDP revision, Raghuram Rajan says revisions take place all the time, no problem as such.
But it needs to be explained what exactly you did and put out all the numbers.

“Reality is GDP is a sausage put together with assumptions, extrapolations, it’s complicated,” he says.

“A defaulter is different from fraud. That (default) may be bad luck. If you start putting defaulters in jail then nobody will take any risk,” Raghuram Rajan says.

“I’m unaware of where those cases stand. It had a list of the largest frauds. The reason I’m worried is if one gets away with immunity then others may follow,” Raghuram Rajan says on the list of fraud cases he flagged to the Prime Minister’s office.

“We’ve now discovered the extent of the problem largely… My sense was that we are now where we thought they might be… The reality is if you don’t recognise it you’re not forced to act,” Raghuram Rajan says.
“We need to take a close look at regulatory and supervisory structure. Regulators can’t stop you from giving bad loans, they aren’t bankers. But they can point out one,” he says.

“There is a fear of the future. They’ve lost their unionised jobs. There is a fear for their kids, no quality education. They see lack of mobility,” says Raghuram Rajan on the distrust for globalisation and liberalisation.

“These are people who’s jobs are being threatened, they don’t see that goods are cheaper,” Dr Rajan says on why globalisation is unpopular. “Trade is responsible for local job losses. But broadly its technology which is responsible. Thanks to online shopping and such,” he says.

“We’re certainly in a situation where the cup is half full, but that also means it’s half empty,” Raghuram Rajan starts off by saying.

Growth is slowing this year globally and will probably slow next year, he says.