Former Reserve Bank of India Governor Raghuram Rajan on Sunday, March 14, said that the government's goal to make India a $5 trillion-economy by 2024-25 was "more aspirational than a carefully computed one".
In an interview, the former RBI Governor warned that the introduction of drastic changes to the monetary policy can potentially upset the bond markets.
"I believe the framework has helped bring inflation down while giving the RBI some flexibility to support the economy," he said. "It is hard to think of what would have happened if we had to run such large fiscal deficits without such a framework in place."
"The RBI has to keep retail inflation at 4%, with a 2% margin on either side. The bank's Monetary Policy Committee considers this target while deciding on the policy rate," he said.
Rajan noted that this framework had been helpful in reducing inflation. "I don't think it has been costly in slowing growth, and this is probably the wrong time to make drastic changes," Rajan said.
The former RBI governor also focused on the 2021-22 Budget, saying that it placed a lot of emphasis on privatisation. He also questioned if the government will be able to deliver on this target. Rajan said, "it will be a colossal mistake to sell the banks to industrial houses.
The government has budgeted Rs 1.75 lakh crore from stake sales in public sector companies and financial institutions, including 2 public sector banks and one general insurance company for the next fiscal beginning April 1.
However, the government has failed to meet its divestment targets by huge margins in the past, reported The Economic Times.
Experts have said that India will take a significant amount of time to return to its level of growth before the pandemic and eradicate the damage caused by the countrywide lockdown imposed last year. The Centre, however, claims that India's economic growth picked up pace after the lockdown was lifted, calling it a "V-shaped recovery".
The Organisation for Economic Co-operation and Development has predicted that India will be among the large economies most seriously affected by the coronavirus pandemic and the restrictions imposed to control its spread.
Data released by the government in February this year showed that India's GDP growth rate for the third quarter (October-December) of 2020-'21 was 0.4%. With this, the economy once again stepped into the territory of positive growth after contracting in two successive quarters.
The government, however, revised the second advanced estimate for the full financial year 2020-'21 to project a sharper drop of 8%, as compared to the 7.7% contraction it had predicted in January.