Former RBI Governor C Rangarajan On The Path To The Viksit Bharat | EXCLUSIVE

Summary

In this Independence Day special, Dr. Rangarajan, former Reserve Bank of India Governor, reflects on India's economic journey post-independence. He highlights India's rise to the fifth largest economy, self-sufficiency in food grain, and success in the service industry. Dr. Rangarajan also discusses policy shifts in the '90s, emphasizing the importance of reforms, investment rates, and job creation for India to become a developed nation by 2047. The conversation underscores the significance of the RBI's autonomy and its role in shaping India's economic policies.

Takeaways

• 😀 India is now recognized as the fifth largest economy in the world, a significant achievement considering its large population.
• 🌾 India has achieved self-sufficiency in food grain, a crucial development from the food scarcity of the 1950s and 1960s.
• 💻 The service industry, particularly computer-related services, has seen remarkable growth, with India becoming one of the largest exporters of these services.
• 🏭 India possesses a reasonably strong industrial base capable of producing a variety of capital goods, intermediate goods, and consumer goods.
• 👨‍👩‍👧‍👦 India's fertility rate has decreased to near two, suggesting that the population may stabilize within a couple of decades.
• 📉 A major policy mistake was the continuation of a development strategy from the 1950s that included high savings and investment rates, a dominant role for the state, import substitution, and emphasis on heavy industry, which was not adapted until the 1990s.
• 📈 The 1991 economic crisis led to significant reforms, including the dismantling of the complex system of permits and licenses, redefining the state's role, and embracing international trade.
• 🏦 Dr. Rangarajan, during his tenure as RBI Governor, played a pivotal role in converting the dollar-rupee rate to a market-driven exchange rate and liberalizing bank lending and deposit rates.
• 🏢 To achieve the goal of becoming a developed economy by 2047, India needs to maintain an investment rate of around 35% of GDP and create an environment conducive to private investment.
• 👩‍💼 Addressing the challenge of job creation and employment growth is critical for India's development, with a focus on sectors that are labor-intensive and can absorb new technologies.

Q & A

What significant economic reforms did Dr. Rangarajan implement during his tenure as the Reserve Bank Governor?

Dr. Rangarajan implemented several revolutionary steps including the conversion of the dollar-rupee exchange rate from an administered rate to a market-driven one, liberalization of bank lending and deposit rates, and ending the government's unlimited power to borrow.

How did Dr. Rangarajan's policies impact India's position in the global economy?

India's economic reforms under Dr. Rangarajan's guidance led to it being recognized as the fifth largest economy in the world, showing significant growth and development compared to previous decades.

What was Dr. Rangarajan's view on India's self-sufficiency in food grain?

Dr. Rangarajan considered India's self-sufficiency in food grain as a very important development, especially when compared to the difficult food situation in the 1950s and 1960s.

How did Dr. Rangarajan assess the performance of the service industry in India?

He praised the service industry, particularly the computer-related service industries, stating that India has done very well and is considered one of the largest exporters of these services.

What was Dr. Rangarajan's opinion on India's industrial base?

Dr. Rangarajan believed that India has a reasonably strong industrial base capable of producing a variety of capital goods, intermediate goods, and consumer goods.

What demographic trend did Dr. Rangarajan highlight as a positive development for India?

He mentioned that India's fertility rate has come down to close to two, indicating that the population may stabilize in another two decades, which is a positive development.

What policy mistake did Dr. Rangarajan identify from India's past economic strategies?

He identified the strategy of import substitution and the emphasis on heavy industry as elements that needed change, which did not occur until almost two decades later, resulting in a slower growth rate for the economy.

What was the most significant achievement of the economic reforms in 1991 according to Dr. Rangarajan?

The most significant achievement was not just solving the immediate crisis but also introducing reforms that dismantled the complex system of permits, licenses, and controls, redefined the role of the state, and embraced international trade.

What advice does Dr. Rangarajan have for the governance of public sector banks?

He suggests ensuring a proper system of selection for board members and making the board of directors responsible for the functioning of the banking system to improve efficiency.

What are the key policy changes Dr. Rangarajan recommends for India to become a developed country by 2047?

He recommends maintaining a high investment rate, adopting a multi-dimensional development strategy, and focusing on job creation, especially in sectors that are more labor-intensive.

How does Dr. Rangarajan view the role of the Reserve Bank of India over the past few decades?

He views the RBI as a strong institution with Governors of high integrity and scholarly excellence, maintaining its independence and providing leadership in monetary policy, especially with the adoption of the inflation targeting framework.