Raghuram Rajan: Don't stall projects forever, find a better way to boost Indian economy

Written by PTI | New Delhi | Updated: Jan 24 2014, 03:09am hrs
Raghuram RajanRaghuram Rajan today favoured cutting through the shackles that keep Indian economy depressed. (AP)
Reserve Bank of India (RBI) Governor Raghuram Rajan today favoured finding a better way of going through the thicket of rules and regulations especially in environment clearance so that projects are not stalled endlessly.

"The fact is that we need to respect environmental rules. But that does not mean we delay projects. Lets make regulations better, not less not more but which is relatively easy to enforce," he said delivering the 8th R N Kao Memorial Lecture organised by Research and Analysis Wing (RAW) here.

Raghuram Rajan said this was a task that needed a lot of work which he hoped the next government will do.

He also referred to a combination of factors like democratic forces, NGOs and CAG that had stepped in when development was going in one direction.

"We need to do it in a better way. It doesn't mean we stop growth," he said adding clearances in the name of environment should not go on say for five years or more.

Speaking about the economy, Raghuram Rajan said in the years to come the measure of country's economic success should be the jobs that are created not by government subsidies and protection to labour intensive industries or sectors, but by facilitating competitive environment that will encourage efficiency and creativity.

Raghuram Rajan said the job agenda required a disciplined focus on issues like the need to improve the quality of infrastructure, youth needing education and training for jobs that will be created, better business regulation and better financial systems.

Outlining the measures being taken by the RBI to improve the financial system, he said they plan to build developmental measures over the next few quarters on five pillars.

They are: clarifying and strengthening the monetary policy framework; strengthening the banking structure through new entry, branch expansion, encouraging new varieties of banks and moving foreign banks into better regulated organisation forms.

Broadening and deepening financial markets and increasing their liquidity and resilience to absorb risks and expanding access to finance for small and medium enterprises, unorganised sector and the poor and remote areas and improving the systems ability to deal with distress of corporates and financial institutions.

He said public sector banks will be given the means to improve their competitiveness. "In the coming months we will discuss with stakeholders in public sector banks about what needs to be done to improve their stability, efficiency and productivity."

Raghuram Rajan said there was need to enlist markets in the aid of banking. Liquid markets will help banks offload risks they should not bear such as interest rate or exchange rate.

"In the coming weeks, we will roll out more measures to improve the quality and depth of the Government Securities (G-Sec) market. We will then turn to money markets and corporate markets," he said.

The Governor said that the fourth pillar would be to reach everyone, however remote or small, with financial services.

"Financial inclusions does not just mean credit for productive purpose, it means credit for paying a doctor to heal your child or to pay lumpy school or college fee. It means a safe mode of remunerated savings and an easy way of making payments and remittances and insurance and pensions," he said.

Shedding the "usual conservatism of a central banker", Raghuram Rajan predicted that the best of India is yet to come.

"We will be a healthier, better educated and richer nation, not just in absolute terms, but even relative to other countries. This is not a jingoist statement based on some intrinsic Indian superiority but a sober recognition that we are much poorer than other countries and catching up is easier than to draw away from the pack," he said.