Outgoing RBI Governor Raghuram Rajan on friday said foreign investors tend to see through the “noisy politics” in India around emotive issues like beef ban, love jihad and ghar wapsi.
With private investment not picking up and jobs not being created, he advocated “step-by-step” liberalisation of the economy for boosting growth.
“We are a very noisy economy, noisy polity. There is always debate about something or other reflected in noisy television programme. But if you look at sensex, it is doing very well. If you look at bond yield, it is very low. I think take away has to be that markets seems to be ignoring noise,” he said, in an interview to Karan Thapar on India Today TV.
“I think political sort of difficulties have had happened through out India’s history. There is always some issues being discussed. I think investors tend to see through this...foreign (investors) also,” he said. Rajan said he was not saying nothing would perturb them but his sense was that “that they have come to accept that emerging markets including India will have noisy politics.” Interestingly, industrial countries themselves have a very noisy politics at this point, he said without naming any country.
Asked about the recent RBI annual report stating that Indian economy was performing below its potential, he said private investment was not coming in. “Corporations are not building new factories and they are not putting up new machines. They are not increasing jobs at the way one would wish them to.” He hoped with a good monsoon demand will pick up in sectors like automobile and cement. “Once we have a good monsoon and a feel good factor prevailing in the economy, people start buying more, then there is virtuous circle, demand energises private investment that build on what public investment that is already growing.”
He said it serves well to do “step by step” and “steady” liberalisation of the economy “without upsetting too many people, upsetting too many constraints in the economy.” The Governor, who steps down from office on Sunday, said he felt labour and land reform have to be done.
“But again we need system. Do we move immediately to a system where there is no security of employment. Don’t you need redressal mechanism. What is the appeal system. We need to have social security system to support the workers. As we process we need to see entire system is built out and that means of course incrementalism...If you too fast on one dimension, you outrun other dimension which are also needed at the same time.”