- Business Line–The Hindu Indian economy has the potential to grow at 8-9 per cent per annum despite the constraints of the political system, said Lord Meghnad Desai in an interview to BusinessLine.
- However, he expressed concern over the slow pace of structural reforms which, he felt, was crucial for the economy’s long-term strength.
- On the farm loan waiver given by Uttar Pradesh government, Desai, who was a Professor at the London School of Economics, said it has been a trend as 80 per cent of the farms in India are uneconomical and the country failed to industrialise at a satisfactory rate due to lack of economic reforms.
- Drawing a parallel with the launch of major reforms by the Margaret Thatcher government in the UK only after it secured a second term, Desai said the reforms in India would pick up pace if Prime Minister Narendra Modi gets a renewed mandate in 2019.
- When asked about his take on the recent merger of five associate banks — State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Hyderabad and State Bank of Mysore — with parent State Bank of India, Desai said the country does not need 29 public sector banks, instead the existence of just five large banks would be sufficient.
- Consolidation, he felt, will help banks take advantage of economies of scale and help them recapitalise. Citing the example of bank consolidation in Spain as the way to deal with non-performing assets, Desai felt that more mergers will benefit the banking sector in India.
- On the monetary policy, he remarked that the recent step taken by the RBI to increase the reverse repo rate by 25 basis points will go a long way in absorbing the excess liquidity with banks in the wake of demonetisation.
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