Reserve Bank of India Governor Raghuram Rajan on Friday announced that the RBI was likely to discuss an appropriate timeline with the government to take the economy to the centre of the medium term inflation band of 2 per cent to 6 per cent.
Speaking at the Bharat Ram Memorial Lecture here he said that a “Volker” like disinflation was never on the cards in India, but an “Urjit Patel glide path fits us very well.”
Industry and Union Finance Minister Arun Jaitley have consistently demanded that the Reserve Bank lower interest rates to spur investments and growth. With inflation slowing considerably, the clamour has surged.
Laying out an agenda for achieving higher growth, Dr. Rajan recommended that the Modi government cut red tape and make it easier to do business. For this, he recommended quick rollout of the Goods and Services Tax (GST) and removal of all impediments to banks recovery of stressed loans.
A well-designed GST bill, by reducing State border taxes, Dr. Rajan further said, would have the important consequence of creating a truly national market for goods and services, which would be critical for the countrys growth in years to come. “If external demand growth is likely to be muted, we have to produce for the internal market … India will have to work on creating the strongest sustainable unified market, which requires a reduction in the transactions costs of buying and selling throughout the country.”
Numerous inspectors who had the power to close down business and the petty bureaucrat, empowered by myriad mysterious regulations, could become tyrants. “The government is examining the cost of doing business in India with a view to bring it down … it is appropriate that the government intends to make him help business rather than hinder it.”
“We should not make banks task harder by creating impediments in the process of turning around, or recovering, stressed assets,” said Dr. Rajan referring to the courts the Government and the Reserve Bank itself.
He also recommended that India invest in idea-producing institutions such as research departments of official local bodies, think tanks and universities
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