NITI Aayog Vice Chairman Rajiv Kumar has blamed former Reserve Bank of India (RBI) governor Raghuram Rajan for the economic slowdown.
There is no evidence to prove that slow growth was the result of demonetisation, he reportedly said.
Kumar referred to Rajan’s policies on non-performing assets and said it was a “false narrative” to say that note ban was the cause behind declining growth rate, reported ANI.
“This is a completely false narrative and people like Mr P Chidambaram and our former prime minister (Manmohan Singh) added to this,” he was quoted as saying.
“If you look at the statistics on growth rate, in the post-demonetisation period, the growth rate came down not because of note ban but because there was a declining trend for the last six quarters. Every successive quarter, the growth rate had been coming down. Starting from last quarter of 2015-16, the growth rate had come down for six successive quarters. So, this was just simply a continuation of a trend and not because of a shock due to demonetisation as it is being claimed,” Kumar said, adding, “There is no evidence to show a direct link between demonetisation and the economic slowdown.”
The NITI Aayog VC further said, “This growth was declining because of the rising NPAs in the banking sector. When this government came into office, the figure (NPA) was about four lakh crore. It rose to 10.5 lakh crore by the middle of 2017. Under the previous governor, Mr Raghuram Rajan, who revised the mechanisms, the NPAs began to grow which is why the banking sector stopped giving credit to the industry.”
He added, “Never have we seen such a continuous and persistent year-upon-year deleveraging of credit. This is the cause of the economic slowdown. And this is what is being compensated by this government by ramping up of public capital expenditure.”
Interestingly, two of the major initiatives which were kicked off during Rajan’s tenure — formalisation of the Monetary Policy Committee (MPC) and cleaning up of bad loans in the system — have since been carried forward by his successor and present RBI Governor Urjit Patel, media reports said.