Raghuram Rajan cautioned against reading too much into the recent resurgence in factory production.
New Delhi:
Former RBI Governor Dr Raghuram Rajan today asked whether the central government would be termed as anti-national for its alleged poor performance on the COVID vaccination front. He was responding to an attack on Infosys by an RSS-affiliated weekly for the IT firm’s inability to fix some glitches on its tax-filing website.
a number of private sector firms in recent months faced with anger The number of individuals in the government or institutions puts it off, the most recent example being Infosys.
“It strikes me as completely unproductive. Would you accuse the government of being anti-national for not doing a good job on vaccines initially? You say it’s a mistake. And people make mistakes,” Dr. Rajan said, citing the strange. Take the rollout of the Goods and Services Tax (GST) as an example.
“I don’t think the GST rollout has been great. It could have been done better… But learn from those mistakes and don’t use it as a club to brush off your prejudices,” he said.
The renowned economist, who is now a teacher, also expressed his views on other related matters during an exclusive interview with NDTV.
For example, he said the recent “rebound” in India’s factory output shouldn’t be read too much, because the numbers have been calculated on a low basis and the allegedly anomalous nature of the recovery.
However, he agreed that there had been “appropriate improvement” on the industrial side. Asia’s third-largest economy grew at a record annual pace of 20.1 percent last quarter, driven by a boom in manufacturing and a strong rebound in consumer spending.
“The key issue here is, ‘Is this a rebound for the entire economy or a rebound for certain sections of the economy?
“Certainly, on the industrial side, there is a fair recovery. But again, it differentiates between goods that are targeted at rich, upper-middle-class people versus goods that are targeted at poor people.”
Dr Rajan cited the example of four-wheeler sales versus two-wheeler sales, the latter of which declined.
He pointed to a change in the economy: Larger, more formal firms are experiencing significantly higher profit growth than smaller firms, even among listed firms.
This, he said, is one of the reasons why the stock market is doing so well. This is why tax collections are on the rise – GST collections grew 30 per cent annually to Rs 1.12 lakh crore in August.
Dr Rajan said, “We are seeing a forced formalization of the economy. We have not supported our small and medium businesses to the extent that other countries have.”
“You don’t want formality by blow. You want formalization by improving conditions for small and medium enterprises to become more formal. I don’t think we see that.”
Moreover, the rising revenue is not being shared with the state governments, Dr Rajan said.
“The state government’s finances are in a very poor form. The Center has swallowed up a significant portion of the revenue through the central cess,” he said, leading to the issue of federalism.
“India in particular is getting too big to be run from the centre. And that too not just from the center but from the ‘centre within the centre’. This kind of hyper-centralisation holds us back.”
“Decisions are not being taken for a long time,” he said. On this front, he cited the example of appointing CEOs of public sector banks.
Dr Rajan said, “This shows that the government is overwhelmed… Many people are looking to the Center for guidance and are not getting it. As a result, we are paralyzed.”
Noting the impact of a faltering economy on people, he pointed to a perceived rise in gold loans – people in India sell their family’s gold only when in dire straits – and a slight decline in consumption.
To ease his situation, he recommended a cash transfer. Highlighting the Mahatma Gandhi National Rural Employment Guarantee Act as a cash transfer scheme for villages, he said something similar is needed for urban India as well.
“One consequence of not supporting them (recession-hit urban people) is that they go back to their villages. And then when you want to start again you have a labor shortage. And persuading it Very tough. They will be well supported in the city, ”said the economist.
He speculates that despite rising revenues, the government may be holding back on spending to maintain credit ratings. And yet, credit rating agencies themselves recommend spending in essential sectors, he said.
On whether investors consider changes in the texture of Indian democracy as a factor in their business decisions, Dr Rajan said businesses generally don’t care as long as it doesn’t affect them.
They often realize late that when a government operates without checks and balances, it ultimately affects them, according to them. He said that even in respect of businesses, arbitrary decisions can be taken.
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