Demonetisation and the Goods and Services Tax (GST) are the two major headwinds that held back India’s economic growth last year, former RBI Governor Raghuram Rajan has said, asserting that the current seven per cent growth rate is not enough to meet the country’s needs.
“The two successive shocks of demonetisation and the GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking up,” Rajan said while delivering the second Bhattacharya Lectureship on the Future of India.
“The reality is that seven is not enough for the kind of people coming into the labour market and we need jobs for them, so, we need more and cannot be satisfied at this level,” he said.
Observing that India is sensitive to global growth, he said India has become a much more open economy, and if the world grows, it also grows more.
“What happened in 2017 is that even as the world picked up, India went down. That reflects the fact that these blows (demonetisation and GST) have really really been hard blows…Because of these headwinds we have been held back,” he said.
While India’s growth is picking up again, there is the issue of oil prices, the economist noted referring to the huge reliance of India on import of oil for its energy needs.
“India can’t work from the centre. India works when you have many people taking up the burden. And today the central government is excessively centralised,” Rajan said.
An example of this is the quantum of decisions that require the assent of the Prime Minister’s Office, Rajan said as he highlighted the recent unveiling of the ‘Statue of Unity’ of Sardar Vallabhbhai Patel as an example of a massive project that required the approval of the PMO.
Touted to be the tallest statue in the world, the 182-metre tall statue was built at a cost of Rs 2,989 crore.