Former Reserve Bank of India governor Duvvuri Subbarao has said that there are several challenges that need to be addressed before the Indian economy could take off. “India’s growth story is not inevitable,” he said.

He was delivering the inaugural anniversary lecture: “India: Will the Elephant start dancing?” The lecture was instituted by Bandhan Bank, which completed two years on August 23.

Later, in a chat with Bandhan Bank founder managing director and CEO C.S. Ghosh and financial journalist Tamal Bandyopadhyay, the former RBI chief commented on a range on issues from demonetisation to NPA.

Speaking in the context of the proposed amendment to the Banking Regulation Act, he said that RBI should not be required to step in to the day-to-day running of a bank.

“Does RBI have expertise in conducting banking business?” he wondered. He also felt that such extraordinary powers (proposed in this case to check NPAs) should come with a sunset clause.

On demonetisation, he said that its long-term benefits would be visible if it helped increased income tax collections.

Subbarao pointed out that job creation and finding a solution to India’s problems in agriculture were two key deliverables. He said that India urgently needs a manufacturing revolution for job creation. “Jobs have to come from the manufacturing sector.. not only from the services sector.” he said, adding that he did not believe that Indian can replicate China’s model of emerging as a manufacturing hub. “Skill shortage is a crisis in India,” he said.

He said that improving agricultural productivity was crucial. While agriculture contributed 15% to GDP, it accounted for 55% of the employment. “Farm loan waivers were not advisable as it usually helped only better-off farmers with access to institutional credit. There is distress at the level of other poor farmers.. need to give them relief.. there is need to address basic issues like improving irrigation facilities,” Subbarao said.

An important agenda on “getting the elephant to dance is improving governance,” . Subbarao said. Noting that India’s present ranking was at 130 out of a 180-strong list, he said that although the government wanted to improve it to 100 in two years, the fact was that “ it is very difficult to improve ease of business.”

Source: The Hindu