‘DeMo, GST crippled growth’
INDIA was growing at a faster pace before demonetisation and GST rollout and 7 per cent might not be enough to meet the country’s needs, former RBI governor Raghuram Rajan said.
“Seven is not enough for the kind of people coming into the labour market and we need jobs for them,” he added.
Speaking at an event at the University of California in Berkeley, Rajan pointed out that India grew at a higher rate for four years — 2012 to 2016 — before the Narendra Modi-led government unleashed the two disruptive moves.
“The two successive shocks of demonetisation and GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking,” Rajan said.
Agreeing that there are signs of the Indian economy picking up pace again, Rajan said economic growth is vulnerable to sensitive issues such as rising oil prices. More so because India depends on import of oil to meet bulk of its energy needs.
If oil prices go any higher, it could hurt the economy, which has started recovering from the twin blows of demonetisation and GST.
According to Rajan, the Indian economy has the potential to grow stronger and faster. So, in that context, a seven per cent growth is not something for the government to brag about.
“If we go below seven per cent, then we must be doing something wrong,” he said adding that is the base on which India has to grow at least for the next 10-15 years.
Rajan explained that the country today faces three major bottlenecks – torn infrastructure, stress in the power sector and the banking sector mess.
Another problem pulling the country down is the excessive centralisation of power in decision making, the former top banker noted.
What happened in 2017 is that even as the world picked up, India went down... DeMo and GST have really, really been hard blows
Former RBI governor Raghuram Rajan