Rajan: Bankruptcy code can’t be only way to clean up banks ‘Excessive centralisation of power a problem’
Observing India is sensitive to global growth, former RBI governor Raghuram Rajan said India has become a much more open economy, and if the world grows, it also grows.
“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,” he said.
While India’s growth is picking up again, there is the issue of oil prices, Rajan noted, referring to the huge reliance of India on import of oil for its energy needs.
With the oil prices going up, Rajan said things are going to be little tougher for the Indian economy, even though the country is recovering from the headwinds Excessive
centralisation of power in the political decision making is one of India’s main problems, former RBI governor Raghuram Rajan has said, as he highlighted the recent unveiling of the ‘Statue of Unity’ as an example of the project that required the approval of the Prime Minister’s Office. Rajan made the remarks while speaking at the University of California. Berkley, on Friday. “India can’t work from the Center. India works when you have many people taking up the burden. And today the central government is excessively centralised,” he said. In addition to centralisation, the unwillingness of the bureaucracy to take initiative, is another problem, he said. of demonetisation and initial hurdles in the implementation of the GST.
Commenting on the rising non-performing assets (NPAs), he said the best thing to do in such a situation is to “clean up”.
It is essential to “deal up with the bad stuff ”, so that with clean balance sheets, banks can be put back on the track. “It has taken India far long to clean up the banks, partly because the system did not had instruments to deal with bad debts,” Rajan said.
The bankruptcy code, he asserted, cannot be the only way to clean up the banks. It is the only one element of the larger cleanup plan, he said and called for a multi-prong approach to address the challenge of NPAs in India.
India, he asserted, is capable of a strong growth. As such the 7% growth is now being taken for granted.
“If we go below 7%, then we must be doing something wrong,” he said, adding 7% is the base for growth over the next decade.