RBI Governor Raghuram Rajan says growth can't improve without supply reforms

By Joel Rebello
MUMBAI: India cannot expect to accelerate its economic growth to 9% per annum unless it improves its supply chain to prepare to the increase in demand that a higher growth rate could lead to Reserve Bank of India governor Raghuram Rajan said.

"We have to create the underlying supply conditions to adhere to much high demand. If you ask me whether 9% growth is possible, my answer would be no," Rajan said replying to a question after a speech he delivered here.

He added that besides supply of goods and services India must also improve the quality of its human capital. "This will need steady progress rather than an overnight elimation of constraints," he said.

Rajan said that though aspirations for a 9% growth rate is good the political class must be careful of not promising too much.

"Populist policies are being driven by need for growth but the political reality is that its a burden to acknowledge it," he said.

Rajan said India has to stay "within limits" because "promising too much may come back to haunt you."
He urged moderation through sustainable growth.

Rajan said the current government's Make in India slogan rather than micro managing things will work better if it just creates an enabling environment like easier tax structures and allow companies to select what they want to do.

"Micro management is going to be more and more difficult. We chose to support small industries to create jobs but those were decimated by global competition. It would have been better if we had supported large industries because it would support a large amount of jobs. I say Make in India but do not restrict making in India to just a few industries but instead create an enabling environment," Rajan said.