There is a need for ‘close coordination’ between the finance ministry and the Reserve Bank, Niti Aayog Vice Chairman Rajiv Kumar said today, advocating a loosening of fiscal stance if the central bank tightens monetary policy. “If the RBI tightens the monetary policy to follow its dharma (duty), then we can compensate for that through fiscal policy. There is a need for cooperation, there is a need to have a macro-economic team in our country so that everybody works together,” he said while speaking at a book release event here. He said the 3.5 per cent fiscal deficit target, which deviates from the original fiscal consolidation road map, is not “very big” and affirmed that India is better placed on other macro-economic indicators like inflation, forex reserves and the current account gap.
In a veiled reference to conflicts between Mint Road and North Block, Kumar said there should not be a “this versus that” in the case of economic policy makers. He said the Niti Aayog, the finance ministry and the Reserve Bank, along with other economic policy makers, can be a part of this “team” which works in close coordination and added that working this way can lead to faster progress. The “upside risks” will trigger for the country this fiscal, Kumar said and exuded confidence of growth touching the 7.5 per cent mark for 2018-19, even as other bodies like the World Bank and Asian Development Bank peg it to come up to 7.2 per cent. Kumar’s remarks on better coordination between the RBI and the finance ministry come in the backdrop of public criticism mounted by both the institutions against the other after the Rs 12,900 crore PNB scam.
While the ministry had blamed the regulator for poor supervision of the bank, the latter countered that its legal options were limited and sought change in laws. Kumar said the panel is preparing a growth road map for the country till 2022, wherein the GDP growth average for the five-year period has to touch 8.5 per cent. In order to achieve the targeted average, the GDP growth rate will have to touch 10 per cent by 2022, he said, adding that India has everything going in its favour in order to accelerate growth. As the country walks on this path, it will have to create its own model of capitalism which is not borrowed from either Europe and the United States, where profit maximisation is the driving motive, he said.
This path should be based on Indian history and context, Kumar said, without outlining contours of the model, saying, “We need to collectively think through it.” Stating that he was recently in China, he said the Communist neighbour has not moved much socially and politically, while India, a unique case which sought change on all the three crucial fronts including social, economic and political, has achieved moderate success on all fronts. On employment creation, he said 70 lakh jobs have been generated as against the need to have 1 crore jobs and also underlined the need to look at the quality of employment, saying it should be in sync with aspirations of young Indians.