Raghuram Rajan, the former governor of the Reserve Bank of India, speaks to BloombergQuint’s Ira Dugal after the launch of his new book.
In the book titled I Do What I Do, Rajan talks about his time as the Governor of India’s central bank.
His three-year term from September 2013 to 2016 ended in controversy, with the outspoken Governor announcing his decision to return to academia. His tenure was marked by both bouquets and brickbats, but saw severe criticism from some political quarters towards the end, including personal attacks.
In his book, Rajan stresses upon the RBI Governor's right to say 'no' to decisions he does not agree with.
While not directly referring to the note ban, Rajan at the launch of his book, said the RBI Governor has the option of stepping down if a decision is forced on him.
He also wrote that he warned the government that the short-term costs of demonetisation would outweigh the benefits.
Rajan on India’s Bad Loans
Speaking about how the central bank highlighted the bad loans problem under his tenure, Rajan said, “People say RBI created the bad loans. RBI did not create the bad loans. The RBI just told the banks that you have to account for this properly so that your owner, the government, can understand the size of the problem.”
On Formalisation of the Indian Economy
While there are benefits of formalisation, the move from formal to informal takes tremendous preparation, said the former RBI Governor. An overnight move can cause a significant amount of disruption, affecting the country’s growth in the medium term, he said, indicating towards the Narendra Modi government’s demonetisation move.
With formalisation comes the question of the degree of regulation, he said, adding that excess regulation has also been a problem in the past. “Some of these businesses may not even be viable if they have to pay tax,” he said.
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