Former Governor of the Reserve Bank of India Raghuram Rajan said targeted income transfers at the very poor have become staple of capitalism even as he criticised farm loan waivers as a tool to alleviate farm distress. He said the top priority for India should be of creating jobs.
“Targeted transfers at the very poor have become a staple of capitalism, that is part of the safety net. Doing it effectively and properly, I think, is something what we see in this country is a number of political parties are saying that we have become wealthy enough to be able to do it. But I still think it has to be done carefully and not layering one thing upon the other,” he said Tuesday at the launch of his book — ‘The Third Pillar – How Markets and the State leave the Community Behind’.
Rajan’s comments come in the backdrop of the Congress party announcing a minimum income guarantee of Rs 6,000 per month to 20 per cent of India’s poorest household if voted to power. The present government has already announced an annual income support of Rs 6,000 to farmers with land holding below two hectares.
He said India needs to focus on alleviating farm distress rather than loan waivers which are known to disrupt credit culture.
“First we need to worry about why people are so distressed and angry. There is a lot of agriculture distress. I personally believe that farm loan waivers are not the answers. But there are other answers,” he said when asked about what should be the focus for the upcoming elections.
The other focus area should be creation of jobs which the people want. “I would say that one is start creating those jobs people want. Take care of the distress, but whatever measures you put, put them as a pathway for people to get those jobs rather than standing in the way of getting those jobs … We can talk about the economic reforms that are needed, but jobs are task one,” Rajan said.
To a query on his criticism of the Rashtriya Swayamsevak Sangh (RSS) in the book, he said: “I have no doubt there are lot of good people in the RSS and it has produced people like Atal Bihari Vajpayee, who I have great respect for. So it’s not an indictment of every person there … but the aims of majoritarian organisations like that (is what) I am worried about and its one example and there are many examples of majoritarian organisations. My worry is that for a very diverse country like India … we simply cannot say that he belongs and she doesn’t. I think we have to be integrated as a country and that’s the country of civic nationalism,” he said
When asked whether he would like to return to India in public service or even a political role, he said, “I am very happy where I am. But if there is an opportunity to be of use I will always be there.”
Rajan is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business in the US.
Earlier in the day, Rajan expressed doubts over Indian economy growing at 7 per cent when not enough jobs were being created and said the current cloud over the GDP numbers must be cleared by appointing an impartial body to look at the data.
Rajan, who has also served as Chief Economist at the International Monetary Fund (IMF), said he had no idea what statistics are pointing at currently and “a revamp” was needed “to really figure out what India’s true growth rate is”.
“I know one minister (in the Narendra Modi government) has said (that) how can we be growing at 7 per cent and not have jobs. Well, one possibility is that we are not growing at 7 per cent,” he told CNBC TV18, as per a PTI report. He did not name the minister. On doubts being raised by some over economic data after revision in growth rate, he said a clean-up act is needed and an impartial body appointed to look at the numbers.
“I just think that we need now to essentially clean up, find out what in fact is the source of confusion with the new GDP numbers, with the revisions etc. I would say setting up an impartial body to look at it is an important step to resorting confidence,” he said. Rajan said the impartial body may throwback the same numbers, but “we absolutely need better confidence in our GDP numbers now given the back and forth we have had”.