1. Raghuram Rajan warns, India escaped ‘License Raj’, may fall into ‘Appellate Raj’

Raghuram Rajan warns, India escaped ‘License Raj’, may fall into ‘Appellate Raj’

In a veiled attack on suggestions made by government-appointed FSLRC panel for overhaul of financial sector laws, RBI Governor Raghuram...

By: | Goa | Updated: February 21, 2015 2:03 PM
RBI, RBI rate cut, RBI interest rate cut, SLR, SLR rate

We need checks and balance, but we should ensure a balance of checks, said RBI Governor Raghuram Rajan. (PTI)

In a veiled attack on suggestions made by government-appointed FSLRC panel for overhaul of financial sector laws, RBI Governor Raghuram Rajan today said the country should not end up in ‘Appellate Raj’ after escaping the ‘License Permit Raj’.

The comments assume significance in the wake of the high-profile Financial Sector Legislative Reforms Commission (FSLRC) having suggested creating a single appellate authority for all financial sector watchdogs, including the RBI.

The proposal, which was aimed at providing checks and balances for decisions made by the regulators, has been hanging fire for a long time due to opposition from various quarters, including the RBI.

“We need checks and balance, but we should ensure a balance of checks. We cannot have escaped the License Permit Raj only to end up in the Appellate Raj!,” Rajan said at an event here.

While he did not make any direct reference to the FSLRC or its suggestions, the RBI governor said: “If we create a multiple appellate process against government or regulatory action that is slow and undiscriminating, we contain government access but also risk halting necessary government actions.

“If the government or regulator is less effective in preparing its case than private parties, we ensure that the appellate process largely biases justice towards those who have the resources to use it, rather than rectifying the miscarriage of justice,” he said.

Observing that the democratic accountability is very strong in India, he said “We may have a long way to go … (as far as) the capacity of the government, by this I mean regulators like RBI also, to deliver governance and public services”.

Rajan further said that in thinking of reforms the country needs to move from theoretical idea of how a system might work in a country with enormous administrative capacity to how it will work in actual Indian situation.

India, Rajan said, needed to choose “a happy medium between giving the administration unchecked power and creating complete paralysis”.

The economic inclusion, he said, should mean easing access to quality education, nutrition, healthcare, finance and markets to all citizens for ensuring sustainable growth.

Rajan said a strong government should be led by those who have expertise, motivation and integrity and can provide the needed public goods.
He also warned that strong governments may not always move in the right direction.

“Hitler provided Germany with an extremely effective administration — the trains ran on time, as did the trains during our own Emergency in 1975-77. His was a strong government, but Hitler took Germany efficiently and determinedly on a path to ruin, overriding the rule of law and dispensing with elections.

“It is not sufficient that the trains run on time, they have to go in the right direction at the desired time,” Rajan said.

He further said that in many areas of government and regulation the country needs more specialists with domain knowledge and experience.

“For instance, well-trained economists are at a premium throughout the government, and there are far too few Indian Economic Service officers to go around,” Rajan said.

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  1. J
    joseph
    Feb 21, 2015 at 10:43 am
    "The comments ume significance in the wake of the high-profile Financial Sector Legislative Reforms Commission (FSLRC) having suggested creating a single appellate authority for all financial sector watchdogs, including the RBI." RAJAN SHOULD LEARN FROM NANDAN NILKENI. Modi was against his pet project AADHAR, even campaigned against him but after the lok sabha. Nilkeni went to Modi after the election and put his point and Modi agreed with him and continued Aadhar. FSLRC is nothing compared to Aadhar. If he thinks its wrong for India and he has better options or some corrective actions then he should talk to Modi directly. He is a reputed man and i dont think Modi will disregard concerns raised by a person of Rajan's stature. Modi is known to listen to people like Rajan. The least he will do is listen to both sides and if Rajan is able to make his point Modi will listen to him. Talking like this isn't gonna help anyone. Modi might not even know about Rajan's concerns. All he is gonna do is make enemies in Finance ministry. I am not die hard fan of Modi but i follow him. He isn't one of those who will stick to their guns even if they r wrong. He wouldn't admit his mistake would make immediate course correction if he is pointed a right direction.
    Reply
    1. R
      Ravi Chauhan
      Feb 20, 2015 at 9:42 pm
      He is absolutely right in saying so. We are already under so many watchdogs and multiple authorities overseeing functions of other bodies. Overseeing and ping judgements on others work has become a national pastime.
      Reply
      1. S
        Sadasivan
        Feb 20, 2015 at 10:39 pm
        Rajan is wrong,as the RBI is bent on allowing many dangerous Derivatives,at the cost of the nation's SOLVENCY,"just because the World is Globalized,as per a Deputy Governor of the RBI,recently".This is dangerous. RBI has too much INDEPENDENCE which is dangerous for India.It is even reported that Central banks,the RBI are controlled by the IMF. Rajan's claim that ther are NO good LOCAL economists is also wrong,as Economics is a simple subject which an Indian housewife can explain to the Western- and developed-economies' puppets.
        Reply

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