Raghuram Rajan talks about his journey as RBI chief, makes important points in his last ever monetary policy briefing

Raghuram Rajan ended speculations over his second term as Governor of Reserve Bank of India (RBI) months back when he announced he will be returning to family life and academia in the US.

While addressing his ultimate monetary policy briefing, Rajan spoke about several important things which will come in handy for his successor too. Although the Indian Government haven’t announced Rajan’s successor, but it is already clear what all he will have to deal with.

Rajan, whose term expires on September 04, has always come across as a calm and composed man, who saved India from Lehman-type crisis.
During his last news briefing also, Rajan was as cool as a cucumber and answered all questions with aplomb. He has even silenced his critics at times with rationale.

His Journey
When asked about his journey as RBI chief, Rajan said, “Critics are always there all the time. But, there are people who send me messages, saying thank you for what you doing. This is part of my job. The most important thing is you have made useful contribution. It was a fantastic job and I have enjoyed every minute of it. Every day when my fellow colleagues used to sit together at work, we managed to move the needle forward. There was a sense of satisfaction. I hope there is some value added,” said Rajan.

Advice to successor
On being asked what he will advise his successor, Rajan said, “I don’t advice successors. There is some likelihood that MPC will be formed and the further decision on rate cuts will be made by a group than an individual. Six people will decide and we should expect them to take independent decision. MPC is under process and it is not going to take much time.”

NPAs-what he started
Rajan spoke at length about the Non-Performing Assets (NPAs). “We are comfortable with recognition process and banks have taken a lot of steps towards NPAs. The culture of cleaning up seems to be well embedded,” said Rajan.

The outgoing RBI chief said the attitude of banks was also changing and the RBI schemes to clear bad debts were now looked at with new eyes.
“There will be no backtracking and banks are cooperating. Banks know what needs to be done. Promoters know what needs to be done,” said Rajan.

GST impact
Rajan said it was premature to talk about GST impact and future rate cuts.

“I don’t think GST implementation will increase inflation and whatever inflation happens, it will be short term. Our focus is meeting the glide path target of 5% by FY 2017. We don’t visualise GST coming before April 2017. It has to factor into medium term horizon,” said Rajan.

GDP and GST
Economists say the GST will lead to 2% growth in GDP. Rajan said it is an enormous undertaking and will require efficient implementation from all sides, states will have to pass it. “The government is confident about it. It is challenging. In terms of GDP, it is more of guess work but other countries have improved efficiency, reduced transporting cost and time,” said Rajan, adding “2% is not a big number, is achievable.”