Big-picture reforms will take time, says Rajan

The Narendra Modi-led government will get on to big-ticket economic reforms only after it has taken care of stalled projects worth $50-70 billion, Reserve Bank of India (RBI) governor Raghuram Rajan has said.

The Narendra Modi-led government will get on to big-ticket economic reforms only after it has taken care of stalled projects worth $50-70 billion, Reserve Bank of India (RBI) governor Raghuram Rajan has said.

“In India, if you are looking for grand, big-picture reforms it may take some time coming,” Rajan said at an event organised in Chicago over the weekend.

The government was focussed, he added, on implementing the stalled projects — “in terms of doing the small stuff, which adds up to the big stuff I think that is already happening”.

There was widespread expectation, specially in the West, that Prime Minister Narendra Modi would launch those reforms as a matter of priority, perhaps in its first budget.

But that didn’t happen.

“In July the interim budget mostly underwhelmed,” noted The Economist. “It (the Modi government) failed to offer big reforms — such as a national push to ease labour laws or a decisive measure helping investors buy land — that would have suggested that India is ready for the boom in manufacturing that Mr Modi says must come.”

But experts considered close to the Modi government have been cautioning western nations about exaggerated expectations on reforms. During a visit to DC, Bibek Debroy went so far as to say that it was way down the list of Modi’s priorities.

Rajan maintained that pitch in his Chicago speech. “I think the government has essentially focussed on implementation because that is really the need of the hour.”

“Lot of projects are being stuck because of environmental permissions, forest clearances,” he added.

On other issues, the governor said he hoped to negotiate with the government a framework for the RBI on monetary policy, which is currently not covered by the bank’s enabling legislation. “This year the government and the RBI will negotiate together to formulate a monetary framework for the RBI.”

And about the recently announced BRICS bank, Rajan said its goal was not to challenge existing multilateral financial institutions such as the IMF and the World Bank. “One of the biggest lacunae in emerging markets is patient, risk-bearing money, so if we can have a bank, which is willing to take junior stakes or equity stake.”