Ra­jan: Bank­ruptcy code can’t be only way to clean up banks ‘Ex­ces­sive cen­tral­i­sa­tion of power a prob­lem’

The Times of India (New Delhi edition) - - TIMES NA­TION -

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.

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