Former Reserve Bank of India Governor Raghuram Rajan told NDTV that India should be protecting its institutions because foreign as well as domestic investors need to have faith in the rule of law. In an interview broadcast on Sunday, Rajan did not explicitly acknowledge that the institutions were under threat, but said India is in a great spot for growth and it is good that the country is engaged in a debate about protecting its institutions.
Rajan, who was the central bank governor from 2013 to 2016, made the remark with reference to questions he was asked about the growing influence of the government on institutions such as the RBI and investigating agencies. During the interview, Rajan also made remarks on topics such as unemployment, farm distress, GDP data revisions and demonetisation.
‘Need independent body to review GDP data’
Rajan said India needs an independent body to review the revisions in economic growth data so that there is confidence in the process. Data is revised all the time, but it is important that when it is done, “you explain exactly what you did and put out the data that you used”, he told anchor Prannoy Roy. Rajan suggested having an independent board with experts from other statistical agencies and other countries to review the data.
On November 28, the government had revised down the GDP growth rates for the 2006-’12 period, saying it had recalibrated the data to reflect a more accurate picture of the economy. The country was ruled by a Congress-led government during that period. Former Chief Economic Adviser Arvind Subramanian has also called for an expert investigation to clear doubts around the revised economic growth numbers.
“Ultimately we have to have confidence, not just from outside investors, but many policymakers are taking decisions based on this data,” Rajan said. “I don’t care about past GDP, but I do care about future data. Outsiders don’t know what’s happening [in reference to the political controversy], and the temptation is to believe the worst. We need to build credibility about our statistics. There’s been enough controversy over the topic that it makes sense to have somebody [independent body] to take a look at it.”
‘We slowed when world was growing faster’
Rajan said that the world was growing faster in 2016 but India slowed because of demonetisation – “the net impression was that it had a significant impact on our growth, and now studies have confirmed that”, he said. Rajan said the government had asked him his opinion on the idea when he was the RBI governor, and he had disapproved of it. Goods and services tax was a good idea in the long run, but it could have been implemented much better, Rajan said.
Unemployment is a very serious issue as the current paradigm is not producing enough jobs even at a 7% growth rate, Rajan said in the interview. Farmers, he said, are stuck in low-growth agriculture, and the agrarian crisis is a huge problem, too. “The paradigm of the combination of minimum support price and loan waivers [for farmers] is simply not creating the basis for agriculture to flourish,” Rajan said, adding that agriculture needs to be looked at not as an industry that needs subsidy, but as a growth engine.