Relation with FM Arun Jaitley is of highest order, says RBI Governor Raghuram Rajan

RBI Governor Raghuram Rajan on Tuesday said that he connected "very well" with Union Finance Minister Arun Jaitley and their relationship "is of the highest order", ever since the minister moved into office. He said that people try to emphasise on differences rather than looking at the large areas of commonality.

Identifying the adverse international environment as the key reason to sluggish private investment, Rajan said that it was affecting domestic demand and insisted that China's slowdown is bad news.

"Private investment is the key concern while public sector is picking up fast. Happy with inflation path as of now," said Rajan in an exclusive interview to India Today's Karan Thapar on television show To The Point.

Expressing satisfaction in Centre's management to keep a check on inflation, he said that it is moderate and that it was global prices that added to food inflation.

According to Rajan, the new GDP series is different from the old GDP series, which is attempting to do things better. Rajan explained that the new GDP series is different from the earlier one, as it doesn't take into account the inflation rate.

Centre's efforts

He said that the Centre is trying to maintain the quality of spending and long-term sustainable growth was vital. According to the RBI governor, industrialists are accustomed to difficult environment and steady reforms are on the way.

"Investors have to be risk takers. Rapid enforcement of rules is vital," said Rajan, endorsing Prime Minister Narendra Modi's pitch. He expressed the hope that inflation would be below 6 per cent by January 2016 due to the steps taken by the government to deal with the weak monsoon this year like giving seeds to the farmers. The economy, he said, was recovering but had not recovered fully yet.

He said he will look through the effects of the base effects of the recent interest rate cut by 50 basis points and noted the inflation may creep up in the next few months.

Oil prices the key

He also pointed out that if the internal oil prices go up, the government will have to relook at the inflation situation. Noting that some sectors of the economy were showing deflation, Rajan said the new GDP series had caused some angst in the industry.

Noting that there was some baggage of expenditure in the system, Rajan said the estimate of the government was to achieve a GDP growth of 7.4 per cent in the next Budget. He said that instead of too much focus on the short-term number situation, long-term steps to push the economy like ease of doing business and credit for small industry should be taken up.

He asked whether we can set the stage for a long-term growth. He said that China's economy slowing down is a concern but it may help attract Foreign Direct Investment to India. However, he added that global environment of slowing demand is not good.

The Reserve Bank of India governor said that the country has good business people who have showed their mettle. On GST, he said the system cannot wait till all the parameters are right.

(In association with Mail Today)