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Demonetisation and GST pulled Indian economy back: Raghuram Rajan
Former RBI Governor Raghuram Rajan on Saturday said that the note ban and the Goods and Services Tax (GST) are the two things that held the economic growth of India back in the last year.
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He also stated that the current growth rate of seven per cent isn’t enough for the needs of the nation.
Rajan, in his address to the audience at the University of California in Berkley, said that the economic growth of the country was happening at a healthy pace before the policies of demonetisation and GST were levied.
“The two successive shocks of demonetisation and the GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking up,”
He further threw light on the fact that a growth rate of seven per cent isn’t something that is going to meet the needs of the people currently.
“The reality is that seven is not enough for the kind of people coming into the labour market and we need jobs for them, So, we need more and cannot be satisfied at this level,” he said.
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Rajan spoke about India’s relationship with the world economy–adding that the nation’s economy is much more open and it would continue to grow with the growth of the world economy.
“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 further threw light on the fact that a growth rate of seven per cent isn’t something that is going to meet the needs of the people currently.
Speaking in the Non-Performing Assets (NPA), Rajan suggested that the best thing to do was to ‘clean up’ in a situation like this.
“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,”
He also stressed that the growth rate, if it falls beneath seven per cent, is a signal to the fact that there has to be something wrong within the economy.
“If we go below seven per cent, then we must be doing something wrong,” he said.
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