Economy

‘Fiscal system must be prepared for Minimum Income Guarantee scheme’

Our Bureau Chennai | Updated on March 28, 2019

N Ram, Chairman, The Hindu Publishing Group, in conversation with Raghuram G Rajan, former RBI Governor, in Chennai on Thursday   -  M VEDHAN

More work needs to be done to make this effective, says former RBI chief Raghuram Rajan

Though Minimum Income Guarantee helps deal with poverty, it shouldn’t turn into some kind of a dole, pointed out former Reserve Bank of India Governor Raghuram G Rajan during a conversation with N Ram, Chairman, The Hindu Publishing Group, after the launch of Rajan’s new book The Third Pillar.

The fiscal system needs to be prepared for such schemes, he added.

“I think we need to deal with the curse of poverty sooner or later. We have discovered direct income transfers help and there is a lot to be worked out in terms of how to make this as effective as possible and how to enable the fiscal position to support this,” he said.

Capacity building

“This is about capacity building and not about keeping people out of workforce and putting them permanently on some kind of doles,” he added. Presenting his views on the Congress party’s proposed Minimum Income Guarantee plan, he said that the fiscal position should be created and there could be ways to do it.

However, there are also other priorities that need strong focus which includes reducing leakages and addressing agriculture distress.

Crony capitalism

He said that there is a need for bigger investment in agriculture, and “we need funds for that.”

Rajan also felt that given the extent of arable land India is well-poised for an agriculture revolution if things were carried out in the right way. It will be a better option than treating agriculture as an industry that needs a subsidy.

On crony capitalism, he stated that the solution lay in limiting its adverse consequences. “I would feel the best antidote to cronyism is competition. We have many people lobbying and each one will have a different objective. In many ways economic competition and political competition are the antidote to cronyism.”

Rajan said India is much better prepared for the next phase of growth from a middle income to a rich nation. A democratic system, instead of an authoritative one, will help achieve the next phase of growth.

Published on March 28, 2019

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