Former Reserve Bank of India Governor Raghuram Rajan on Saturday warned that any attempt to turn a large minority into “second class citizens” will divide the country and create internal resentment.
“In this age of geopolitical turmoil, it will weaken us and also make the country vulnerable to foreign meddling,” he said.
Rajan made the remarks while speaking at the 5th conclave of All India Professionals Congress, a wing of the Congress party in Raipur.
In his address, the former Reserve Bank of India governor pointed out that the ongoing crisis in Sri Lanka is an example of what happens when a country’s politicians try to deflect a job crisis by targeting minorities. “It does not lead to anywhere good,” he said.
Sri Lanka is facing its worst economic crisis since independence in 1948. The country has run out of foreign exchange reserves that have limited essential imports of fuel, food and medicine.
The island nation’s inflation rate touched 54.6% year-over-year in June while food inflation shot up to 80%. The United Nations has warned that more than a quarter of Sri Lanka’s people are at risk of food shortages.
In his Saturday speech, Rajan also said that there is a notion among some quarters in India that its democracy holds back economic development and that we need a strong, even authoritarian, leadership with few checks and balances to grow.
“I believe this argument is totally wrong,” he said. “It is based on an outdated model of development that emphasizes goods and capital, not people and ideas.”
Rajan further said that India’s future lies in strengthening its liberal democracy and its institutions, and not in weakening them.
“The under-performance of the country in terms of economic growth seems to indicate the path we are going on needs rethinking,” he said. “...Indeed for about a decade, probably since the onset of the global financial crisis, we haven’t been doing as well as we could. The key measure of this underperformance is our inability to create the good jobs that our youth need.”
Rajan, however, also lauded the Reserve Bank of India saying that India has sufficient foreign exchange reserves and that the country would not experience economic problems like Sri Lanka and Pakistan.
“RBI has done a good job in increasing the [foreign exchange] reserves,” he told ANI. “We are not having problems like Sri Lanka and Pakistan. Our foreign debts are also less.”
He also added that there is “inflation all over the world” at present.
“RBI is increasing interest rate which will help in reducing inflation,” Rajan said. “Most inflation is in food and fuel. As we can see food inflation is coming down in the world and will decrease in India also.”
India’s retail inflation has stayed above the Reserve Bank of India’s upper tolerance level of 6% for six straight months till June.The price-rise indicator had touched an eight-year-high of 7.79% in April.
In June, the Reserve Bank of India’s monetary policy committee raised the repo rate by 50 basis points to 4.90% in an attempt to control inflation. This was the second hike in the repo rate within five weeks. The repo rate is the interest rate at which the central bank lends to commercial banks.