India needs a new covenant on growth: Raghuram Rajan

Fomrer RBI governor Raghuram Rajan feels that India needs to think about a new covenant on how we can can generate economic growth that we saw in the first few years of the present century.Speaking to ET NOW, Rajan spoke of a staggered restarting of the economy with the aim of both saving lives and preserving livelihood. Rajan said that the post-Covid period can't be spend with the same kind of financial fragility and fiscal tensions with which we entered the crisis. This, he emphasised, will need significant reforms and how to build a political consensus around those reforms will be the central question."India in the old way simply doesn't cut it," Rajan said.Rajan warned that If those reforms aren't ushered in, India will only "crawl along" in an ineffective way and this is one thing that the country can't afford given its large young population.On lifting the lockdown, Rajan said that India needs a staggered exit with areas which are least vulnerable opening first with adequate safety measures. He said that India can't remain under a lockdown forever.Rajan also said that the current crisis will be disinflationary in nature and that institutional mechanisms like the inflation targeting regime are necessary instruments to instill confidence in investors that over medium term both fiscal as well as financial stability will be maintained. On fiscal packages, he warned one has to be careful about the fiscal packages, and has to make sure they do not shake currency and hike interest rates. He said the government has to be very careful while structuring the scheme.On the US-China tussle, Rajan said that India has done well to stay out of it.

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