Attributing decline in economic growth to “slow governance” and faulty allocation of natural resources, RBI Governor Raghuram Rajan said the GDP will improve to 7 per cent in the next three years on the back of political stability.“The sharp slowdown in GDP from 8-9 per cent growth to 4-5 per cent in the last two years was caused by issues such as environment and land acquisition problems, delays in withdrawal of fiscal and monetary stimulus, irregularities around allocation of natural resources and slow governance,” a Citi report quoted Rajan as saying.
Rajan had addressed a group of investors in Boston on Thursday.“On the back of political stability, improved business and investment climate, GDP growth is poised to improve towards 7 per cent over the next three years,” he said.India’s economic growth has slipped to sub-5 per cent in 2013-14 and 2012-13 fiscals. In the current financial year, the RBI estimates the growth to be 5.5 per cent.
In the first quarter of 2014-15 fiscal, the GDP improved to 5.7 per cent from 4.6 per cent in the corresponding period a year ago.Referring to the recent SC judgment on coal block allocation, Rajan said it “may create uncertainty in the short-term, but long-term, it is a positive evelopment”.He said the RBI considered it prudent to be prepared for the eventual exit from low rates. In his vision for India’s banking system involves a more competitive banking structure.Stressing that India needed more banks, he said that the RBI was a little more conservative in the current round of licensing, given that it was timed around the elections.
The RBI, he said, would come out with a framework on the NBFC (non-banking finance company) sector, which needed to complement the banking sector. He felt the government needs to improve governance of PSU banks before reducing its stake.
