New Delhi: India is in the midst of a ‘growth recession’ that is being run through extreme centralisation of power in the Prime Minister’s Office (PMO) and powerless ministers, claimed former Reserve Bank of India (RBI) governor Raghuram Rajan, amid the ongoing slowdown. Voicing his opinion in India Today magazine, Rajan recommended measures to curb the crisis. He pitched for reforms to liberalise capital, land and labour markets, and spur investment as well as growth.
To boost competition and improve domestic efficiency, Rajan suggested India to join free-trade agreements. He also asked the Centre to acknowledge the problem to address the slowdown.
“The starting point has to be to recognise the magnitude of the problem, to not brand every internal or external critic as politically-motivated, and to stop believing that the problem is temporary and that suppressing bad news and inconvenient surveys will make it go away,” he wrote.
Furthermore, he added,”To understand what has gone wrong, we need to start first with the centralised nature of the current government. Not just decision-making but also ideas and plans emanate from a small set of personalities around the Prime Minister and in the Prime Minister’s Office (PMO). That works well for the party’s political and social agenda, which is well laid out, and where all these individuals have domain expertise. It works less well for economic reforms, where there is less of a coherent articulated agenda at the top, and less domain knowledge of how the economy works at the national rather than state level.”
He also acknowledged that the present NDA-led government ‘inherited some of the problems from the previous Congress-led UPA regime’ but after five-and-a-half years those problems needed to be resolved. “Even if some of the problems are legacies, the government, after five-and-a-half years in power, needs to resolve them. A massive new reform thrust is needed, accompanied by a change in how the administration governs,” Rajan asserted.
Rajan also advised the government to refrain from cutting personal income tax rates for the middle-class for now. Talking about the government’s aim of becoming USD 5 trillion economy by 2024, the former RBI governor said,”The repeated government allusion to a USD 5-trillion-economy by 2024 seem increasingly unrealistic.”
(With agency inputs)