Speed up reforms without creating uncertainty- Reghuram Rajan urges Government

The RBI Governor has made an unusually strong criticism of the government’s approach to economic reform in the Annual Report of the RBI.  He urged the government to be firm on reforms without creating uncertainty.

The Governor has described the present growth rate of the economy is nothing near to its potential.

“For a country as big and populous as India, reforms cannot be shots in the dark, subjecting the economy to great uncertainty and risk. Wherever possible, we have to move steadily but firmly, ever expanding the scope of reforms while always limiting the uncertainty they create. “

The Governor’s remark is to be read in the context of continuing chaos regarding the passage of important reform legislations in the Parliament.

Two important reform measures of the government- GST and the land acquisition bills are pending with the Parliament amidst opposition protest.

The Overview of the Annual Report written by the Governor reminds that time has reached to execute big reforms to realize the full potential of the economy.

On Public Sector Banks

The RBI Governor also criticized the Public Sector Banks for the present banking sector illness. “The banking system is dominated by PSBs. While a number of extraordinary officers have led PSBs over time, recent bank underperformance suggests room for improvement.”

He observed that there are visible skill gaps between the top managers of PSBs and private sector banks.

“Because PSBs compete in the same market place for talent as do private sector banks and foreign banks, and because skill gaps are increasing at middle management levels because of past hiring freezes, they will be unnecessarily hampered if they are unable to pay appropriate compensation to middle and senior managers, as well as Board members.”

`The Governor also hinted that the newly constructed PDMA has problems in mobilizing resources for the government.