RBI Governor Rajan on GST, ease of doing business, macro picture, exchange rate and tolerance debate

In a TV programme (NDTV), RBI Governor Raghuram Rajan, one of the most well respected central bankers in the world,  made certain observations about Indian economy including  a sharp fall in exports, inflation, public sector investment , slow private investment, exchange rate and political discourse affecting economic agenda.

On the exchange rate: Governor Rajan is not much bothered about Indian rupee losing exchange rate competitiveness vis-à-vis currencies of some of the competing emerging markets. There is no point seeing depreciation of the domestic currency and then importing inflation. In the end , it plays out. So, he does not favour any effort by the central bank to devalue rupee.

On macro picture: There is a pick up in public investment in road building and hope that the same would pick up in the railways. Private firms in certain sectors  are witnessing slow investment as they reel under heavy debt. One thing that has to be kept in mind is deficient Monsoon rains which have led to subdued rural demand.

Still in certain  sectors like  automobile, there are signs of revival (the latest sales volume saw  22 per cent  annual increase).  In the banking, certain structural reforms like grant of licence to new banks like Bandhan Bank, IDFC Bank and payment banks would trigger economic activity and generate jobs.

On ease of doing business: “RBI is working on some of the things we can fix directly. We are truly convinced we need to have business environment easier”.

E-commerce and start-ups: It is an ideal opportunity for India where because of high cost of  land and commercial estate, the brick and mortar is becoming an expensive.

On much delayed Goods and Services Tax (GST): While the government is  trying hard, passage of GST Bill by Parliament would send a strong signal in the world and “ buy us enormous protection against any volatility”.