India can be far more successful and far more influential than it is today, believes RBI governor Raghuram Rajan.

Delivering the Fourth C K Prahalad Memorial Lecture organized by the Ananta Aspen Centre and Confederation of Indian Industry (CII) in Mumbai on Friday, he was reflecting on the theme of “Reforming the Financial Sector”. The discussion was chaired by Rahul Bajaj, chairman, Bajaj Auto Limited.

Rajan stressed that in difficult times, environment for growth has to be achieved in the right way by working hard towards recovery and aiming at sustainable growth. “While the monetary policy will be accommodative there is room to expand sustainable growth potential. By continuing with reforms that the government and regulators have announced a sustainable growth potential can be achieved,” he said.

He asserted that the RBI would focus on keeping the interest rates low in the near term as well as future to have a moderate interest rate regime to help borrowers as well as the savers. It will also focus on cleaning up the banking sector of the distressed assets, so that it can fund the growth agenda, he said.

Rajan also suggested that India must resist special interest rates for targeted stimulus, long tax breaks, subventions, subsidies, directed credit, all of which historically rendered industry un-competitiveness with government over extended and country incapable of gaining its rightful position among nations.

Reflecting on what RBI is trying to do and what more it needs to do in improving the environment of the financial sector, Rajan elaborated on four aspects: the need to foster competition and innovation; creating hospitable environment to those who don’t belong to the club; dealing with distress for improving structures; and strengthening human capital in the financial sector.
 
Read the text of the lecture here: https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=976