‘Democracy crucial for next phase of India’s growth’

Former Governor of the Reserve Bank of India Raghuram Rajan on Thursday said the Rs. 72,000 minimum income guarantee scheme for the poor, NYAY, promised by Congress, needed to be targeted well and the fiscal space should be created for it. “This is about capability building and not about keeping people out of the workforce and putting them permanently on some kind of dole,” he said.

Mr. Rajan was in conversation with N. Ram, Chairman, The Hindu Publishing Group, after the launch of his book The Third Pillar — How Markets and the State leave the Community Behind . The event was organised by HarperCollins India.

“The objective is to provide enough to the poor segments of society to have purchasing power, with which they can build capabilities like better schooling, better healthcare, better nutrition and thereby come to a position where they can be contributing people in society,” he said.

Reducing leakages

Mr. Rajan said there was lot to be worked out in terms of delivery of NYAY in terms of how to make it as effective as possible. “The fiscal space has to be created. And there are ways of creating it. What we need to be careful about is we can’t do everything we want. We have to prioritise. This (scheme) is important. We need to figure out how to target it well and reduce leakages. There is also an issue of agriculture distress and we need to concentrate on how to make investments in agriculture. There is lot of fiscal issues we need to address,” he argued.

Mr. Rajan, who is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business in the U.S., also said India could be well poised for an agriculture revolution, if the sector was viewed rightly rather than being treated as an industry which needed subsidy. India was much better placed for next phase of growth, from middle income to rich country. “That’s why I would say let’s not give up on the current system. Let’s not give up on democracy and become authoritative. We need the current system for next phase of growth and we would be thankful at that point of time,” Mr. Rajan said.

He also pointed out that factors such as corruption, disbelief in fairness of current system turn people against working for the best person and vote for autocratic people who promise them alternatives. “They might realise their mistake in the longer run, but by the time it is too late, the democracy is already shut down,” Mr. Rajan warned.