The ex-RBI governor of India and the world recognized economist Raghuram Rajan was recently at Brown University for a lecture.
Indian economy, not sustainable in the long-run?
Now, the opposition of the ruling Indian government is using his lecture as a bait against Narendra Modi whereas it is being said that he proposed an attack against the same during his speech. His speech talked about how the Modi government has excelled in the field of making the Indian economy consumption-driven but then again, Modi’s work is not sustainable in the long run.
What else did he say?
Here are a few pointers he talked about:
1) Remove politics from various institutions and provision of higher autonomy there. By institutions, he means various investigation agencies and universities.
2) Don’t go around ignoring the fiscal world. India has a high fiscal deficit and the ignorance will lead to further drainage of cash resources. At one point, things will go for a toss.
3) Make Indians more export competitive by keeping low tariffs and working more on exporting services. Make sure there are checks in place, transparency in the process and increase efficiency.
4) Reduce intervention via public companies. If you look at the banking sector right now, most companies are public, controlling all financing. The government needs to prioritize, provide them with greater autonomy to boost democratism and to gain the better trust of people.
5) Start a change right from the base level. There should be a devolve of sorts and the government should start trusting more local bodies. Local bodies like the local police and other local authorities. A change in the whole game of funding where the center funds the state and the state funds the local bodies needs to change!
6) A stimulus won’t work if you already have stressed sectors. India has sectors like banking and automobile on the extreme edge of the stress zones. The government needs to be specific, check reports and decide what to do with such companies and chalk out the companies that can be rescued from the crisis and the ones that will hinder the economy further.
7) Work on better factor markets. Provide security to Indian workers who can be hired and fired at any point these days. Improve contract systems, get flexibility and make it better to acquire and work with factors like land as well.
8) Analyze regulations, prune where needed and move ahead. Some laws like zoning laws demand modifications, hill stations must not have random houses built here and there and there must be a strict provision to follow all teh defined laws
Raghuram Rajan gave his tips at the lecture, focusing on what he deems best. It is only on the Indian government to take what seems right and leave what doesn’t fit.
