Raghuram Rajan: Let India Grow at 8-10% For 10 Years Before Chest-Thumping

Nirmal Singh 3C Company noted that former RBI governor Raghuram Rajan has said the government should not have done “chest-thumping” on being the fastest-growing economy without achieving very strong GDP expansion for 10 years amid the new trailing China on economic growth post demonetization.

Nirmal Singh 3C Company quoted a piece of information mentioned in a PTI interview, in which he said India can lecture the world on things such as culture and history, but on growth, it should do that only after achieving 8-10% rate for 10 years.

The only central bank governor in a period of two decades, Rajan had called rising India a one-eyed king in the land of blind.

BJP leader Subramanian Swamy has allegedly asked to sack him; in fact, he said: he was “mentally not fully Indian”. Retaliating to these allegations, Rajan said that his comment was taken out of context.“Not that I was forecasting anything, I was merely saying we have to be a little cautious about being too bullish about ourselves.

That remark was made in April 2016, every quarter since then, our growth has fallen. So, I would argue in hindsight, and I didn’t have any reason to believe that would be the case, but caution was warranted,” he maintained.

As per the statistics released, India’s GDP growth plunged to 5.7 per cent during April-June this year; it went down by 6.1% in preceding three months. China registered the growth rate of 6.5% in both the quarters.

Nirmal Singh 3C Company there has to be an urgent pick up to 8% or 9% with higher private investment and revival in exports.  “There are so many other things that we can lecture the rest of the world — cultural achievements, historical achievements, etc., but on growth, let us lecture once we have achieved another 10 years of 8-10%,” he advised.

An 8-10% growth for 10 years would be an extraordinary achievement, but that is the growth rate needed for 10 years to reach the level of middle income, he stressed. “We have done ever since the 1990s on and off 6-7-8%. We need a couple of percentages more on that for 10 years and then, we will be a much bigger economy,” he said. “We should not go chest-thumping.

Nirmal Singh 3C Company further quoted: I would prefer that we establish another 10 years of very strong growth of 8-10%.” Rajan, who had anticipated the 2008 global financial crisis, said Indian economy still is very small at $2.5 trillion, but “we feel we are a big country.” China is five times India’s size.

 

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Center Backs RBI, Asks Them To Seek Criminal Proceeding Against The Loan Defaulters

Just one week after giving the Reserve bank of India (RBI) the power to deal with the unpaid loans and the authority to direct lenders to initiate the insolvency resolution in case there is a default in the payments, the RBI has identified 12 of the country’s biggest loan defaulters and has now asked the creditors to pursue bankruptcy proceedings against them. Nirmal Singh 3C Company says that the default in the payments is not a small problem, it leads to a cut of about USD 150 billion, adding debt to Asia’s third largest economy.

This means that now the banks can no longer leave bad debt on their books and can forcefully put aside the money to cover the losses during the times the bank is short on the funds and the bank seeks to comply with international capital standards.

According to Nirmal Singh 3C company, it was assumed that this year the provisioning requirements would be comparatively less but if criminal proceeding start, them even this year would be just another year of delay of profit recovery in the banking sector.

The 12 defaulters named by the RBI are on accounts owing more that ₹ 50 billion and have about 60% of the loan listed as non- performing as of March 2016. These accounts alone constitute to about 25% of overall gross non-performing assets.

Nirmal Singh 3C Company says that it is high time that the RBI started acted on it. India’s stressed debt has reached its highest level with about 80 percent made up from the non- performing loans (NPLs) and the remainder from the reconstructed loans.

How stressed debt effects the economy?

Stressed debt means the holding of funds in the hands of those not using it for any fruitful purposes. This makes less fund available for new loans and hampers the chances of economic growth in the country. The development of the country is effected due to the cash crunch the banks face when the debts are not re-payed to them on time. To solve this problem, the government has taken various steps like debt- equity swaps, balancing the economic situation for the banks.

Solution for the stressed debts

Nirmal Singh 3C Company says that after looking at the complete situation, with an oversight committee looking into the matters of the settlement and a proper investigation against the defaulters is going to help the bank recover the loses and use the money for the new projects.