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Investors tend to see through noisy politics in India: Raghuram Rajan

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'.

twitter-logo PTI   New Delhi     Last Updated: September 3, 2016  | 12:40 IST
Investors tend to see through noisy politics in India: Raghuram Rajan
Raghuram Rajan

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, he said, "investors tend to see through" political discourse.

"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 very noisy politics at this point, he said without naming any country.

He was asked division in politics, Kashmir and Indo-Pak tension could cause concerns in the mind of foreign investors.

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."

Replying to questions on job creation, the outgoing Governor said jobs were being created in informal and small sectors and "we don't count them properly".

Stressing that there is a need to create more and better jobs, Rajan said that "what we are trying to do" is to build infrastructure, make doing business easier, improve the quality of finance and increase the quality of human capital.

"If we do all these, jobs will come... we do need to create jobs. This is the issue of the moment for everybody in India, how do we create more jobs," he said.

The RBI Governor said on the ease of doing business front there are areas of success and at the same time India has a long way to go in some areas.

"...we have a long way to go in some areas. There are areas of tremendous success and what we need to do is replicate them all around."

Citing an example, Rajan said "I can file my taxes in India more easily than in the US".

On abolition of the Planning Commission, he said: "Whether it is called Planning Commission, whether its called Niti Aayog, I think what really matters is that it prepare us in terms of policies...

"...there is a need for an organisation that help prepare us for the future, it help to analyse programmes, it helps design better programmes. That's what NITI Aayog seems to be doing," Rajan said.

On the GDP numbers, he said: "I think, better not to look growth at quarter on quarter basis, but on average basis".

 

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