Economic reforms in India are going in the right direction, but the level is “wrong”, RBI Governor Raghuram Rajan has said, referring to some of the outdated regulations that are currently in place.
“Well let me put it this way, the direction is the right one. The level is wrong. We have too much of the wrong kind of regulation and too little of the right kind of regulation,” Rajan told Bloomberg TV in an interview on Thursday.
“So we do need to hack away at this, and it will take time, it doesn’t happen overnight. We are doing it. We do recognise that we overregulate. That business needs a better environment,” he observed.
“At the same time there are a whole set of new businesses coming in that we have to find ways to deal with. For example, online lending. How do we do with what happens in a downturn?” Rajan said.
He was responding to a question on economic reforms in the country.
Rajan rued that people tend to talk only about big ticket items, but not the other reforms that are currently being undertaken.
“Well I think one tends to focus on the big iconic items like in India there’s now a goods and services tax which is likely to unify the country. That’s stuck so far in some Parliamentary discussion between the opposition and the government. Hopefully it will be done sooner rather than later. But really there’s a lot going on the ground which is less obvious,” he said.
“For example last week the Prime Minister inaugurated a programme called ‘Start Up India’ which is about really eliminating the bureaucratic hurdles of starting new business.
New business had to register with 10, 15, 20 different authorities including the pension fund,” Rajan said.
“You have one employee why do you need a pension fund at this point? So the idea here is to make it simpler to start, but also remove the inspections. For three years no inspectors would show up. You self-certify what you did,” he said, adding that these kinds of reforms are really building on each other.
“And there’s a very vibrant private sector in India also which is taking off. Internet market places, fantastic new development because what India doesn’t have is cheap land. You can’t build retail stores everywhere.
“But if you build a virtual warehouse with warehouses performing the role of you now, storing goods. You can connect small town households to the big market. And you can connect small town manufacturers again to the big market,” he said.
Responding to another question, Rajan said he is not worried about Chinese economic slowdown.
“In terms of the quantity of growth, there’s still a lot of growth coming from China in terms of dollars. Of course percentages are falling all the time. That is naturally to be expected of an economy which is growing richer and therefore which is going to slow,” he said.
“So I’m not excessively worried about Chinese growth,” Rajan said.