“While timely implementation of GST will be challenging, there is no doubt that it should raise returns to investment across much of the economy, even while strengthening government finances over the medium term”, Rajan said in the fourth bi-monthly monetary policy statement.
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Rajan had championed the introduction of an MPC, so that future rate decisions would no longer be left to the discretion of RBI governors.
At this juncture, the economy should be supported by lower interest rates to enhance the demand for durables and to boost the manufacturing sector, said Gupta, observing that the cost of credit to businesses is high as compared to many competitive economies, impacting not only the domestic but also the worldwide markets. At a time when the economy was growing at the slowest pace, Rajan was expected to cut rates and boost spending and demand.
Earlier in the day, RBI Governor Raghuram Rajan said “as we have reiterated in the past, we do not see the FCNR (B) repayments as disruptive”. Earlier, some bankers said that it was the lack of liquidity that was holding rates high, now I hear from some that it is fear of the FCNR (B) redemptions that is making them reluctant to cut rates. Prices of pulses and cereals are increasing continuously. But Rajan has been patient with such comments.
“Critics are there all the times”.
While he didn’t disclose where he plans to head next after his tenure ends in the coming weeks, he said he could go to his previous employment in academia that also included considerable involvement with Indian educational institutions, particularly the Indian School of Business. The most important thing is that at the end, you feel you have made a useful contribution.
During his first policy review, Rajan had clearly outlined the tasks before him.
“We hope a commendable job of cleaning up the banks’ of their toxic assets would be carried forward by the new RBI Governor”, Rawat added. “In our view, the measures that we have taken in the RBI were and are justified given the condition that we have”.
In the three years since, he has taken a number of measures towards these goals.
In December 2015, he set a timeline for banks to clean up their books by March 2017.
Calling it as “harassment for ordinary customers”, Rajan said that the norms have been simplified over the years, but sometimes local branches may not be aware about it.
Apart from controlling inflation and clamping down on bad loans, Rajan’s focus was to increase financial inclusion in the country.
Rajan said that even with the pay increases from the Seventh Pay Commission, it was hard to predict any long term impact on inflation.
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In a bid to meet the perceived liquidity crunch due to upcoming redemption of Dollars 20 billion, RBI today announced of pumping Rs 10,000 crore by buying government securities. “I don’t think it will mean that the spigot will be open and suddenly we will see a huge amount of rate cuts, but the possibility of cuts can not be ruled out”.
