India should find ways to support higher economic growth on a sustainable basis and not fritter away gains as it did in the past, RBI Governor Raghuram Rajan said on Wednesday.
Prime Minister Narendra Modi’s two-year old government is seeking to bolster an economy which grew 7.3 percent, among the fastest growth rates in large economies, but below the 8 percent growth needed to generate jobs for millions of Indians joining the workforce every year.
Rajan said the government had created a platform “for strong sustainable growth,” but said it would need to ensure it stays on that path.
The Reserve Bank of India governor has cut interest rates by 150 basis points since the start of 2015 to a more than five-year low, but is under pressure to ease further.
“As a central banker who has to be pragmatic, I cannot get euphoric if India is the fastest-growing large economy,” Rajan said in a speech to banking and finance students in Pune.
“Our current growth certainly reflects the hard work of the government and the people of the country, but we have to repeat this performance for the next 20 years.”
Without citing specific instances, Rajan said previous governments had become too complacent by periods of high growth, saying India still remained a relatively poor country.
“We cannot get carried away by our current superiority in growth, for as soon as we believe in our own superiority and start distributing future wealth as if we already have it, we stop doing all that is required to continue growing,” he added.
“This movie has played too many times in India’s past for us to not know how it ends.”
Rajan also defended a comment widely cited by local media last week in which he compared India’s fast-growing economy to being a one-eyed king in the land of the blind – which was seen by some government officials as denigrating India’s success.
Finance Minister Arun Jaitley was quoted by CNBC-TV 18 as saying “any other country in the world would be celebrating” with the rate of growth being posted by India.
Rajan noted his intent was to signal that India’s “outperformance was accentuated because world growth was weak,” while also chastising those who stir controversy by misinterpreting his comments.
“Speakers have to be more careful with words and not be gratuitously offensive. At the same time, listeners should not look for insults everywhere, and should place words in context so as to understand intent,” he said.