Emphasising the need to have a decentralised structure of government, former RBI governor Raghuram Rajan today said that the governments should learn how to implement reforms from the Narsimha Rao and Dr Manmohan Singh. In an interview to ET Now in Davos, Rajan said political leadership has to build consensus to implement reforms. He also said that some of this can be learned how the former Congress Prime Minister and Finance Minister worked behind the scenes to make things work.
Without taking any name, Rajan said that leadership is important for reforms and an overly-centralised governments can’t achieve that. “An overly-centralised structure of government may offer leadership but may not offer the ability to implement and one of the lacunae we have seen over the last few years is that the policy plans at the top don’t get translated into implementation,” Rajan said.
He also talked about a host of issues related to Indian economy, Lok Sabha polls and farm distress. Here are some snippets from his conversation:
People want change: He said Indian voters are very smart and want change because of low job growth, low-tolerance in the country and concerns over institutional freedom.
“My sense is the pressure from people now for change is increasing and any government will have to respond to that… In this election as a citizen of India, there are three big issues — jobs, how tolerant we are towards different views of minorities and concern about how to protect our institutions. Whether it is Supreme Court, the election commission, or RBI,” he said.
On Modi govt: The positive about the Modi government was the enactment of GST and bankruptcy law, while among negatives were government inability to implement labour and land reforms.
“The positive was GST and bankruptcy law. The negatives to some extent is that we have done little on labour flexibility… The other big lacunae is on land acquisition,” he said.
7% growth not enough, India has to create jobs:
“India is a largely consumption-led economy that is not creating enough jobs. But going forward we have to move towards a more job-creating economy, all the growth will go for nothing if it does not create good jobs. Consumption and investment should go hand in hand.”
On agri reforms: “Farm reforms should be in a structured manner. You need to identify who is eligible. Blanket farm loan waivers don’t make sense because they go to the wrong people. There should be specific waivers for people who can’t pay, just like you do for industrial corporations.”
Time to make RBI governor’s position clear: Govt should formalise the position of RBI governor and his powers.
“As we become more developed, we have to manage the relationships so that it survives different personalities. Formalising some of the structures makes sense so that they are not constantly eroded, for example, the position of the RBI governor what level he or she occupies in the hierarchy is completely left up to the spur of the moment, some secretaries pretend that they are above the RBI governor and the hierarchy keeps getting blurred. It is time that we make it clear what that position is and why that position exists for the other regulators as well,” he said.
“It would be appropriate for the RBI governor to be below the finance minister but typically above the bureaucracy, because it is not appropriate that the RBI governor be dictated to by a secretary in the government.”
On RBI-govt relationship: “RBI works as an entity of the administration and works under the government. But RBI should get the operational freedom to carry out the mandate.”
via Raghuram Rajan: Govt should learn reform lessons from Narsimha Rao-Manmohan Singh: Raghuram Rajan
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