Rajan says faster growth needs tremendous investment to create supply
RBI governor Raghuram Rajan speaks during a seminar in Mumbai on Monday. (Photo: AP)
Mumbai: RBI governor Dr Raghurm Rajan said they had projected 7.2 per cent growth and have to create a supply position for demand. But for nine per cent growth, “we need huge investment for creating supply to boost demand,” he said to a question whether India could have nine per cent growth, at the regional G20 meet in Mumbai by Gateway House and others.
Dr Rajan said. “In some sense, I see nine per cent growth as a situation where we are investing tremendous amount and thus creating the supply which will then help the demand. So, what we need to do is not just boost demand but we need to boost supply also, which means a lot of work on a number of fronts, which currently the government is into.”
Dr Rajan cautioned that reaching nine per cent growth rate cannot be attained overnight. “Nine per cent growth is certainly an aspiration we should have but we need to eliminate the supply constraints, including that of human capital,” he said.
The biggest source of concern is that pressures for growth won’t go away. “The political reality of slow growth is hard to accept,” he said as he voiced the possibility of the need for low growth.
Answering whether it was possible to have higher levels of growth without inflation, he said, “No”. “We have to create underlying supply conditions that would allow us to sort of have a much higher demand,” he said.
Referring to the Make in India programme he said it is hard for government to micro manage which products to manufacture. It could be a success “if government creates a framework by facilitating the ease of doing business, have transparent and predictable tax policies, and allow businesses to create what is needed.” He said “I think micro-managing the future is going to become very very hard. And that is why again and again I say let’s make in India but what that does mean is let’s not restrict what we make in India.”
Rajan blasts IMF for being easy on stimulus policies
RBI governor Raghuram Rajan said the monetary policy of various central banks push capital into emerging markets and create difficulties for them. “What we are seeing is a global game of musical crises,” as the economic crisis is now threatening export dependent emerging economies.
He took the IMF to task for not questioning these stimulus policies but applauding them from the sidelines. Lashing out at the IMF he said it had failed and that’s why countries are going in for regional arrangements instead of approaching multilateral agencies. Approaching the IMF now carries a stigma because of its failures in Argentine and other countries and now Brazil.
He said unless demand and production increases in the developed countries growth will not pick up. But wealth is in the hands of the rich “and after they have their first jet and yacht, what other demand do they have,” He called for transfer of wealth from the rich to the poor.
( Source : deccan chronicle )
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