File photo of the former RBI governor

NEW DELHI: Former RBI governor Raghuram Rajan on Sunday said governments need to listen to a broader spectrum of people to reduce the possibility of mistakes, instead of planning their actions solely based on demands from their supporters.

When asked about the phenomenon of elected autocrats at the Times Litfest Delhi , he said, "It is worrying. It is often people, who appeal to a certain segment of society, have a very strong following. What happens then is that the potential for mistakes increases. You are not listening to the broader electorate. 'These are the people who elected me and I am going to listen to their will and wishes.' And you take countries down the wrong path sometimes."

He suggested that stakeholders in the system often bowed to strong leaders. "Illiberal democracy is not just a function of the leader, it is also a function of the system, which doesn't stand up and exercise independence - the corporate houses, the press and the business groups. All of them essentially tend towards bowing even though there are exceptions. They do that because their interests are all aligned. This is where illiberal democracy is crony capitalism also because it's a small group. There is a cosy relationship between the political and corporate establishments."

While Rajan said one needs to wait for data to emerge to be able to assess the full impact of demonetisation, the economist from Chicago Booth added that tax authorities could play a significant role in identifying evaders based on data at their disposal. At the same time, he cautioned against harassment. "We have to have a very people-friendly way of investigating based on all the tremendous amount of information that is now being collected. It's important to emphasise the message that we need better tax compliance in this country. To the extent we can do it without unleashing inspector raj."

The outspoken economist also suggested a competition within the government to improve service delivery. "We need competition in government services. Why should you go to get a passport from one location? Why not empower any location in India to give you a passport. Wherever there are choke points where there is a monopoly deliverer of a service that you need immediately, you become subject to their tyranny."

