Former Reserve Bank of India (RBI) governor Raghuram Rajan has said that the country should not focus on import substitution by erecting tariffs under the Aatmanirbhar Bharat initiative of the government. Rajan cautioned that India had taken this route before, but did not succeed.
While addressing a webinar on the topic ‘India’s Third Pillar – The Way Forward’, conducted by Bharatiya Vidya Bhavan’s S P Jain Institute of Management and Research (SPJIMR), Rajan stressed that in order to export, it was important to get imports of inputs at a cheaper price. Giving out the example of China, Rajan said that the country had risen as an export power on the back of the assembly. He said that imports were necessary to be able to export and erecting huge tariffs was not a great idea. The economist said that it was paramount to create a conducive environment for production in the country.
Emphasizing the importance of targeted spending, Rajan said that if done wisely, it can be fruitful for India in long term. He said that the RBI had a difficult job ahead of it as it would have to find a way to balance out between growth and inflation. He refused to comment on the central bank’s monetary policy and said that there was a Monitary Policy Committee in place to figure things out.
Addressing the issue of the economic slowdown in coronavirus times, the former RBI governor said that it was necessary to study the effects of slower growth on the economic system. He said that reforms being carried out after identification of problems were great but it was important to have all stakeholders on board. He said that it was important that India focused on building a healthier financial system as the country was falling behind both in terms of quality as well as quantity.