Growth rate slowdown in India itself a big problem : Rangarajan
Hyderabad/UNI: Reserve Bank of India former Governor C Rangarajan on Friday said though there is no recission, the growth rate slowdown in India is itself a ‘big problem.
Recession means actual decline in output and in income that is not happening in India, but there was slowdown of growth rate in India, Mr Rangarajan, the Chancellor of the ICAFAI Foundation for Higher Education(IFHE) told reporters after inaugurating a seminar on : Non-Performing Assets (NPA) and its Resolution in Indian Banks’ at IFHE here.
What we have is a cycle in the change of growth rates, he said for the period from 2006-2008, the average growth rate was 9.4 per cent and now, according to the recent quarterly growth rate is 5 per cent.
He said that as far as developing countries are concern, we must be really concerned about the slowdown because what is really important to the economy is strong growth.
To a question, Mr Rangarajan said at the current growth rate, reaching the USD 5-trillion GDP target by 2025 is not possible and the required rate of growth to achieve that level is in excess of 9 percent per annum.
It may mentioned here that the Modi government soon after assuming office for the second term has set a target of taking the economy to USD 5 trillion over the next five years.
‘I think growth rate probably pick up next year ‘ and this year, the estimate is 5-6 per cent, he said.
Mr Rangarajan said the government can provide actual cash to the banks , but whereas the government gives theoretical induced funds to the banks and it use to invest in government floated bonds.
Therefore, there is no cash inflow and the only thing is technically, the capital of the bank increases but the banks gain because interest is paid on the bonds, he said.
Liquidity should be increased by infusing the funds through recapitalization, the former RBI Governor said.
When asked about any jobs cuts due to banks mergers, he said “ I won’t’ think so, there will be no job cuts due to banks merger and the Union Finance Minister had assured of it. But what could happen is that the further recruitment can be slowed down , he informed.
The fundamental principle of the mergers is to increase the size of the banks and its efficiency, he said.
The plans with respect to mergers are not very clear and the advantages that flow out from mergers may or may not be there, Mr Rangarajan maintained.
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