Interview: India cannot afford to become intolerant society:Raghuram

Amid nationwide outrage over the murder of an outspoken journalist, former RBI Governor Raghuram Rajan has said India cannot afford to become an intolerant society as tolerance is “extremely important” for its economic growth. Rajan, who exited Reserve Bank of India a year ago, had courted controversy in 2015 lecture where he talked about growing intolerance in the country, deviating from his usual focus on monetary policy issues. In an interview to PTI, he justified his comments saying public figures have a responsibility to “sometimes speak up on what is good for the country. I just think it had to be said”. That lecture was followed by the incident of beating to death of a Muslim man suspected of having eaten beef with various critics warning that protection of individual rights was giving way to a strident majoritarianism. The murder of journalist-activist Gauri Lankesh is unfortunate, Rajan said.

Q: Do you think demonetisation failed to achieve its objective as 99.9 per cent scrapped currency returned to the banking system?

Rajan: I don’t think you can answer that question just now because some of the benefits we have to wait and see over the longer term and some of cost still playing out. So, we don’t know enough at this point of time. It’s also possible that we cannot measure it fully. So, ultimately answer will be opinion rather than information based on the data at this point of time.

Q: Do you think that impact of demonetisation on economy likely to continue for some more quarters?

Rajan: It seems as if the cash necessary for transactions have largely come back. You don’t see uptick in the cash at this point. That would suggest at least the effect in hurting transactions will probably be not there going forward. Some of the concerns are that some of informal companies have become more stressed or have gone out of business because they did not have enough buffers during the time the sales dropped and other possibility is that the kind of adverse effect on sentiment and on investment will continue for sometime.

Q: Did you expect all currency to come back into the banking system?

Rajan: I have said before that Indians are very clever.

Q: Was the demonetisation exercise successful in curbing black money?

Rajan: There are two issues. One is stock and other is the flow. As far as stock goes, we still have to see how much black money investigation into the money which have been brought back to the system unearths. That depends on how quickly investigation are completed. The hope was if it didn’t come back you wouldn’t have to go through that. Now that has come back, you have to go through that process. So that’s on the stock. The longer term concern from corruption perspective, from tax evasion perspective is on the flow. Have we changed the incentives for people to hide their incomes or have the set of measures GST, demonetisation, etc convinced more people that makes sense to pay your taxes? That again we will have to see. How much tax compliance has increased as a result of all these?

Q: Do you think that growing intolerance in the society is impairing growth? This is what you alluded in you convocation speech at your alma mater IIT Delhi?

Rajan: Let me start with what do you say intolerance. Actually it was a about tolerance. It was about India’s tradition of tolerance, the strength of India. It was saying that tolerance was extremely important for our economic growth, especially given the kind of service/innovative economy we were wanting to be that it was to my mind a strength we had. That we should be very careful not to lose it. So, it was emphasising India’s strength as opposed to saying this is a problem and I feel very proud of that speech which was given to young people. So, I just think it had to be said. Public figures have responsibility, especially if they occupy a place which young pays attention to them to essentially sometimes speak on what is good for the country. Tell me there is any line in there that as a sensible Indian you disagree with.

Q: Do you see any change since then especially in the light of killing of rationalists and growing cow vigilantism?

Rajan: Any killing is unfortunate. Lady journalist killing has become an issue because people are concluding that it was because of what she was writing. I think it’s early days to conclude anything. I think we should let the investigation happen and until we have more information it would be premature to jump to any kind of conclusion. India does not move linearly in any direction and I would argue that there are reasons for certain amounts of hope when you look at the Supreme Court judgement on privacy which also expanded the realm of tolerance for certain kinds of behaviour. I think that is a very important judgement and an indication that there are many ways, many directions in which we are moving as a country. That said I would say I would repeat what I said in IIT Delhi speech that tolerance has always been our strength and as a diverse society with so many religion, so many languages, so many modes of behaviour, that we cannot afford to become an intolerant society. It would strike at the very soul of India. That said there is lot of reasons for dynamism and hope in this country.

Q: Did anyone from government said that your speech was taken out of context and correct message did not went out?

Rajan: I did not get any push back on that speech. In fact I actually met the minister a week after that and the minister said this is exactly what I have been saying.

Q: There were criticism with about one-eyed king remark from various ministers. How would you react to that?

Rajan: Again that particular remark was taken out of context. I would also say that I was forecasting anything, I was merely saying that we have to be a Little cautious about being too bullish about ourselves. That remark was made in April 2016, every quarter since then our growth has fallen. So, I would argue in hindsight and I didn’t have any reason to believe that would be the case but caution was warranted. We should not go chest thumping. I would prefer that we establish another 10 years of very strong growth 8-10 per cent. We have earned the right to lecture the rest of the world on growth. There are so many other things that we can lecture the rest of the world — cultural achievements, historical achievements, etc, but on growth let us lecture once when we have achieved another 10 years of 8-10 per cent. When we will then have truly reached the level of middle income and that would be extraordinary achievement that we can feel truly proud about. We need another 10 years. We have done ever since the 1990s on and off 6-7-8 per cent. We need couple of percentages more on that for 10 years and then we will be much bigger economy. One of things I see as an international traveller and I talk to investor groups is India still very small twoand-half trillion GDP, but we feel we are big country. They look at China, they see five times India’s size. So, the old discussion of India and China, we are not paired any more. I think in order to pair, they have to slowdown, we have to grow for the next 10 years and then people will see as us in a more serious light.

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