Cash ban, GST held back growth, says Ra­jan

Hindustan Times (Chandigarh) - - FRONT PAGE - Agen­cies

WASH­ING­TON: For­mer Re­serve Bank of In­dia gov­er­nor Raghu­ram Ra­jan has said the November 2016 ban on high-value cur­rency notes and the roll­out of the Goods and Ser­vices Tax (GST) in July 2017 dealt “re­ally re­ally hard blows” to In­dia’s econ­omy at a time when global growth was peak­ing, news agency PTI re­ported.

Ra­jan, PTI re­ported, was de­liv­er­ing the sec­ond Bhat­tacharya Lec­ture­ship on the Fu­ture of In­dia at the Univer­sity of Cal­i­for­nia, Berke­ley, on Fri­day wherein he also sug­gested that In­dia’s cur­rent growth lev­els were not sat­is­fac­tory.

“What hap­pened in 2017 is that even as the world picked up, In­dia went down. That re­flects the fact that th­ese blows (de­mon­eti­sa­tion and GST) have re­ally re­ally been hard blows... Be­cause of th­ese head­winds, we have been held back,” PTI quoted Ra­jan as say­ing.

His com­ments came a day af­ter the sec­ond an­niver­sary of the de­mon­eti­sa­tion de­ci­sion, which has be­come an oc­ca­sion for the op­po­si­tion to re­new crit­i­cism of the govern­ment. Union fi­nance min­is­ter Arun Jait­ley had on Thurs­day de­fended the govern­ment de­ci­sion afresh, point­ing to fac­tors such as an in­crease in the tax base and for­mal­i­sa­tion of the econ­omy to con­tend that the move had helped In­dia in the longer

term.

“By the time the first five years of this govern­ment are over, we will be close to dou­bling the as­sessee base,” he said in a Face­book blog ti­tled ‘Im­pact of De­mon­eti­sa­tion’.

Ra­jan, in his ad­dress, said a growth rate of 7% per year for 25 years was “very very strong” growth, but in some sense this has be­come the new ‘Hindu rate of growth’, which ear­lier used to be 3.5%, PTI re­ported.

‘Hindu rate of growth’ refers to the pe­riod be­fore the 1990s when In­dia’s econ­omy growth stag­nated at that pace.

“The re­al­ity is that 7% is not enough for the kind of peo­ple com­ing into the labour mar­ket and we need jobs for them, So, we need more and can­not be sat­is­fied at this level,” Ra­jan said.

He also said that In­dia was now sen­si­tive to global growth since it has be­come a much more open econ­omy, and if the world grows, it also ex­pands at a faster pace.

In­dia, he as­serted, is ca­pa­ble of strong growth. “If we go be­low 7%, then we must be do­ing some­thing wrong,” he said, adding that it was the pace at which In­dia has to grow at least for the next 10-15 years.

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