The Indian economy is slowly coming out of the shock of the epidemic. In such a situation, former Governor of Reserve Bank of India (RBI) Raghuram Rajan has warned that any major changes in the monetary policy structure of the country can affect the bond market. Rajan said on Sunday that the current system has helped to contain inflation and encourage growth. Rajan said that the government’s goal of reaching the Indian economy at $ 5,000 billion by 2024-25 is more than aspirational. He said that even before the pandemic, this goal was not carefully calculated.
The former governor said I believe the monetary policy system has helped in bringing down inflation. There is also scope for the Reserve Bank to support the economy. It is also difficult to think that if this structure were not there, then how would we have suffered such a high fiscal deficit.
Inflation target expected to be notified this month
He was asked whether he was in favour of reviewing the two to six per cent inflation target under the monetary policy. The Reserve Bank has been given a target to keep retail inflation at 4 per cent (2 per cent up or down). The six-member Monetary Policy Committee (MPC), headed by the central bank governor, sets policy rates keeping this goal in mind.
The current medium-term inflation target was notified in August 2016. It ends on 31 March this year. The inflation target for the next 5 years is expected to be notified this month.
The bond market may be affected
In this perspective, Rajan said, if we make a big change in this structure, then it will pose a risk of the bond market getting affected. The government is planning to take a significantly higher debt to revive the economy affected by the Coronavirus. In such a situation, concern is being raised about total financial health from some circles. The yield on the bond is also going up.
The government’s record was very volatile
Regarding the reform measures, Rajan said that a lot of emphasis has been laid on privatization in the budget of 2021-22. He said that the record of the government regarding privatization has been very volatile. He said how it will be different this time.
Rajan said that there is a lot of transparency in expenditure and receipts in this budget. This was not seen in the earlier budget.
Target to raise Rs 1.75 lakh crore from disinvestment
However, along with this, Rajan said that things are not more clear in the budget about revenue raising and financial sector reforms. The government has set a target of raising Rs 1.75 lakh crore through stake sale in public sector companies and financial institutions in the current financial year. The government will also sell stakes in two public sector banks and a general insurance company.
Rajan is currently a professor at the University of Chicago Booth School of Business. He said that there is very little mention in the budget about what will be done for the poor and unemployed.
Apart from this, he said, the process of increasing the charges is also going on. At a time when global demand is increasing due to heavy demand in the West, we should prepare for export. An increase in charges is not the proper way to do this.
Government banks will have to sell industrial houses a huge mistake
When asked about the privatization of the two banks, Rajan said that no more details have been given as to how this will be done. Rajan said, it would be a huge mistake to sell banks to industrial houses. He said that selling a good-sized bank to a foreign bank would also not be politically viable.
The former governor of the Reserve Bank said that perhaps a private sector bank is in a position to acquire a public sector bank, but he is not sure that he will show such a desire.
Will have to take care
Talking about the current macroeconomic situation of the country, Rajan said that when the economy is down by 8%, then the figures of further growth can be extraordinary due to the removal of lockdown and simple increase and suppressed demand. He said, we will definitely register a big growth in 2021-22 but we have to be careful in finding out what it means.
read this also- Why the prices of petrol and diesel increased, Petroleum Minister himself gave this big reason
read this also- AC is going to be expensive after TV, know how much the price is going to increase
.