Reserve Bank of India governor Raghuram Rajan claimed that one-year old Narendra Modi government has taken steps to create an environment for investment in the country and is “sensitive” to the concerns of the investor. However, he conceded that the expectations from the Prime Minister Narendra Modi led BJP government when it came to power last year were “probably unrealistic”.
“This government came in with tremendous expectations and I think the kind of expectations were probably unrealistic for any government,” the RBI governor said while addressing the Economic Club of New York on Tuesday.
Rajan said in the minds of the people, Prime Minister Narendra Modi’s image was that of “Ronald Reagan on a white horse” coming to slay anti-market forces and such comparison was “probably not appropriate.”
Rajan’s remarks come as the PM Modi-led government completes one year in the office this month, having received a commanding majority from the electorates that wanted jobs, economic development and respite from rising prices and corruption.
The RBI Governor said a “big part” of the business environment is taxes and the government has said it will not bring retrospective taxation again.
“However once the tax authority levies a demand on you, there is a quasi-judicial nature of that proceeding and therefore it has to go through the courts before it is to be resolved. The government cannot intervene,” Rajan added.
He also said that the corporate tax rate will also come down one per cent every year going forward.
On the issue of subsidies, the most debatable economic issue in the country, he said petrol and diesel subsidies have gone. “Going forward these subsidies will be transferred directly into the bank accounts,” Rajan said, adding that already the cooking gas subsidy is being transferred directly to the bank accounts.
Rajan also said that there is a “broad consensus” for the Goods and Services Tax (GST) and while he had hoped for the GST Bill to have passed in the just concluded session of Parliament, he feels there is “enough momentum” that “it will be done well in time and roll out by March 31 or April 1 next year.”
Pointing out the future steps of the government, he said there are tremendous plans for investment, particularly in the Mumbai-Delhi industrial corridor and freight corridors.
On the issue of inflation, he said that inflation “has come down tremendously in India” and rupee has basically stayed relatively flat since the beginning of the year.”
“…if you look at rupee’s volatility relative to other currencies, you’d have to argue that the rupee has been one of the most stable currencies (against) the dollar,” Rajan said.
However, the RBI governor consistently reiterated that with the planned investment, the growth of the economy can be faster.