GST will unify the nation: Raghuram Rajan

KOLKATA: The implementation of the much-talked-about Goods and Services Tax will be good for the economy , feels RBI governor Raghuram Rajan. Addressing students at Presidency University on Thursday , Rajan said, "Broadly speaking, there are two major advantages that GST will bring. Firstly GST could increase the tax base because it will bring more people under the tax net. Secondly , GST will re duce the barriers between states. It will make the country a common market place." Incidentally, the Bengal government is supporting the revised GST bill following the inclusion of a compensation clause.

Commenting on the alarming non-performing asset level in the banking system, Rajan added that banks have devised a mechanism to avoid over-borrowings by large borrowers. The governor said RBI maintains a database shared among banks.

He said Indian banks have the right kind of leveraging, adding that "those who said that the banks have no capital requirements are not sensible."

Citing the instance of Indian economy , he said foreign share in government debt is 3%-3.2%, which is reasonable. "It is easy to be tempted by easy money from outside and then get into problems later. There is a need for the golden mean," he said.

Portraying the need for debt in society, Rajan said it was also responsible for creating antipathy among entities.

Rajan added that cutting interest rates to rock bottom levels was not a good idea. "Better to have growth in real activity rather than a financial market boom due to distortion in prices."

The RBI governor was in the city ahead of the board meeting of the apex bank on Friday .