RBI hyping inflation: Jagdish Bhagwati
There will be pressure on RBI from the Government to cut rates and prop up growth, especially with general elections not very far away, where it will have to establish its credentials before the voters, Bhagwati argued.
The professor of economics and law at the Columbia University, however, applauded Subbarao for standing up and preserving the independence of the central bank by not giving in to Government's wishes in the recent times. "It is a very good thing and that is a plus factor."
Bhagwati said having ushered in "track one" reforms in 1991, the Government should now focus on the "track two" reforms which will focus on the social sector.
He said the reforms have helped in boosting growth which has given us the resources that can now be allocated towards social welfare.
"You have to first develop the means to build resources which can then be spent," he said, citing the case of land reforms, "where we have failed to redistribute incomes even after the reforms".
Amid the debate over organic versus genetically modified crops, he stressed on the need to adopt the latter, in spite of the concerns voiced by environmentalists. "The choice is between an imaginary Frankenstein and an established way of increasing productivity."
There is also a case for bringing down tariffs, Bhagwati said, citing the highly elevated tariffs of around 12 percent in the manufacturing sector which makes Indian goods uncompetitive in the