India's economic growth has been delayed due to demonetization, GST: Raghuram Ryan


WASHINGTON: Demonetization and Goods and Services Tax (GST) are two main skills that kept India's economic growth last year, said former RBI governor Raghuram Rajan, who says that currently seven percent growth rate is not enough to meet state needs.

Speaking to the public at California's Berkley University on Friday, Ryan said four years – from 2012 to 2016 – India was growing faster before being hit by two main leaders.

"The two consecutive shock demonetization and GST have had serious implications for growth in India. Growth was of interest at a time when the growth of the global economy increased," he said, as he handed over another Bhattacharyi lecture on the future of India.

Ryan said that the growth rate of seven percent annually for 25 years was "very very strong" growth, but in a sense, it became a new growth rate in Hindu, which was three and a half times earlier, said Rajan.

"The reality is that seven is not enough for people entering the labor market and we need jobs for them, so we need them more and we can not meet them at this level," he said.

Given India's vulnerability to global growth, India has said that India has become a much more open economy, and if the world is growing, it also grows more.

"What happened in 2017 is that India has also descended after it came into the world. This reflects the fact that these blows (demonetization and GST) were really hard blows … Due to these winds, we they were kept back, "he said.

While India's growth rises again, it is a question of oil prices, the economist warned, referring to India's relentless reliance on oil imports for its energy needs.

With oil prices, Ryan said that things would be a bit more difficult for the Indian economy, although the state recovered from apparent demonization and initial barriers to the implementation of the GST.

Regarding rising untapped assets (NPA), he said that in such a situation, the best thing to do is "cleanse".

It is imperative that you are "dealing with bad things", so that with pure balances, banks can return to the line. "India has cleared the banks for a long time, partly because the system did not have instruments to deal with bad debts," said Rajan.

The bankruptcy code, he argued, can not be the only way to clean the banks. This is the only element of a major purification plan, he said and called for a multi-country approach to address the challenges of NPAs in India.

India, he argued, capable of strong growth. Thus, seven percent of growth is now approved.

"If we go below seven percent, then we must do something wrong," he said, adding that this is the basis on which India must grow at least for the next 10-15 years.

India, he said, needs a million jobs a month for people who join the workforce.

Today, today it faces three major bottlenecks. One is a torn infrastructure, he said and warned that construction is one of the industries that the economy is in the early stages. "Infrastructure is creating growth," he said.

Secondly, the short-term objective should be to clean up the energy sector and to ensure that the electricity produced actually belongs to people who want power, he said.

Bank clearing is the third major bottleneck in India's growth, he said.

Part of the problem in India is that in political decision-making, the centralization of power is exaggerated, he said.

"India can not function from the center. India works when you have a lot of people who are burdensome. And today, the central government is overly centralized," said Ryan.

An example of this is the quantum of decisions that require the climbing of the Prime Minister's Cabinet, Ryan said, highlighting the recent disclosure of Sardar Vallabhbhai Patel's "Statue of Unity" as an example of a major project that requested PMO approval.

Source link