At a time when the world economy is slowing down, Reserve Bank of India Governor Raghuram Rajan cautioning the government against relying too much on merchandise export-led growth through ‘Make in India’ and advised to widen the programme to ‘Make for India’. He also advised that enabling environment should be created for all sectors, and not only manufacturing, to bloom. He also cautioned against growing exports from China and suggested against an export-led strategy that involves subsidising exporters with cheap inputs, as well as an undervalued exchange rate, simply because it is unlikely to be very effective at this juncture. Rajan, formerly Chief Economic Advisor in the Finance Ministry, said India would have to compete with China, which still has some surplus agricultural labour to draw on, when it decided to push manufacturing exports. There is a need to create a strong sustainable unified market which requires a reduction in transaction costs of buying and selling. A well designed GST Bill, by reducing state border taxes, will have the important consequence of creating a truly national market for goods and services, which will be critical for our growth in years to come. Our banking system is undergoing some stress. “Our banks have to learn from past mistakes in project evaluation and structuring, as they finance the immense needs of the economy,” he advised. They (banks) would also have to improve their efficiency as they competed with new players like the recently licensed universal banks, as well as the soon-to-be licensed payment and small finance banks. With a rising Non-Performing Assets (NPA) of the nationalised banks he pitched for financial inclusion and some budget sops to boost savings for better recovery ratio.
