Rajan said that a lot of emphasis has been laid on privatization in the budget of 2021-22.
Former RBI governor and noted economist Raghuram Rajan once again said that the decision to sell public sector banks to industrialists would be a mistake. Finance Minister Nirmala Sitaran has announced the privatization of two more state-owned banks in the financial year 2021-22. After that their number will be reduced to 10. The Chief Economic Advisor has even said that in the coming days, there will be only 3-4 big state-owned banks in the country.
Rajan said that any major changes in the monetary policy structure of the country can affect the bond market. He said that the current system has helped in controlling inflation and encourage growth. According to him, the government’s goal of reaching the Indian economy at $ 5,000 billion by 2024-25 is more aspirational. He even said that even before the epidemic, 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. ‘
Preparation is the strategy keeping inflation targets in mind
He was asked whether he was in favor of reviewing the inflation target of two to six per cent under the Monetary Policy. The Reserve Bank has been given a target to keep retail inflation at four percent (up or down two percent). The six-member Monetary Policy Committee (MPC), headed by the central bank governor, sets policy rates keeping this goal in mind.
Changes in structure will affect the bond market
The current medium-term inflation target was notified in August 2016. It ends on 31 March this year. The inflation target for the next five years is expected to be notified this month. 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. Bond yield is also going up.
Emphasis has been on privatization in the budget
Regarding the reform measures, Rajan said that a lot of emphases 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.