Af­ter the Mega Vic­tory, Time for Eco­nomic Re­al­ity

First, the govern­ment needs to iden­tify the con­straints hold­ing back growth

The Economic Times - - Economy - JA­HANGIR AZIZ

banks when there is vir­tu­ally no fis­cal space. Pri­vati­sa­tion is the nat­u­ral so­lu­tion es­pe­cially given cur­rent eq­uity val­u­a­tions. The new govern­ment in its pre­vi­ous avatar was clearly not averse to sell­ing state as­sets. But this time around it would­meanre­duc­ing­gov­ern­ment’s share­hold­ing to mi­nor­ity sta­tus in the bank­ing space, which has been sacro­sanct since the bank na­tion­al­i­sa­tion of the 1970s. Not that there is any­thing wrong in do­ing so; on the con­trary it is the right pol­icy as the RBI un­der Gover­nor Ra­jan has been ad­vo­cat­ing. How­ever, it is a hard choice. The third con­straint is In­dia’s un­for­tu­nate tryst with high in­fla­tion for the last four years. At the risk of sound­ing like a bro­ken record there is no trade-off be­tween growth and inf la­tion when the lat­ter is above 4-5%! There is a pre­pon­der­ance of

ON IN­FLA­TION

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