Hyderabad: Reserve Bank of India Governor Raghuram Rajan today said that India will need years of strong growth to catch up with China on per capita GDP and cautioned against expanding economy at the cost of environment.
"So yes, we have a long way to catch with the level of per capita GDP and that means many years of strong sustainable growth. I want to emphasise here, because a few years of growth will not help. After those few years, we have very slow growth. We need sustainable growth which is why we need systems in place, we need macro-stability in addition to the growth," he added.
China's per capita GDP is about four times of India's, he said.
Rajan was speaking here at an interactive session at National Institute of Rural Development and Panchayati Raj.
The per capita income in India at current prices is estimated to be Rs 93,293, as per data on Provisional Estimates of Annual National Income and Quarterly Estimates of Gross Domestic Product 2015-16.
Rajan also highlighted that India's credit to GDP is 50 per cent, significantly below when compared to some emerging markets such as China, where the value is 150 per cent.
The Governor further said growth should not happen at the cost of environmental sustainability.
"Now whether just the GDP numbers are not enough to say that we have developed...absolutely not. It is good we reach their level of per capita GDP without the environmental damage that has occurred in some parts of China, that is also occurring in some parts of India.
Rajan also replied to query on the devaluation of rupee to deal with the global slowdown and said, "The issue of value of the rupee is a complicated one. Some people think that to increase exports, the answer is devaluing rupee. There are, strictly, ways of doing it (devaluation), but lot of them require significant actions on the financial system that some of our neighbouring countries used for long time."
"It has lot of side effects including...the inflation will pick up in this country if you have to pay significantly more for your imports. You have to pay significantly more for your oil, it will have inflationary impacts.
"It (devaluation of rupee) may offset any benefits you get from the devaluation. My belief is that today's value of the rupee is pretty reasonable and I don't think we should emphasise moving one way or the other as the answer to any problem," he said.
Rajan said growth should not happen at the cost of environmental sustainability.
"Now whether just the GDP numbers are not enough to say that we have developed...absolutely not. It is good we reach their level of per capita GDP without the environmental damage that has occurred in some parts of China, that is also occurring in some parts of India.
"We have to have an environmental sustainable development path and also we have to have equitable development path," he added.
RBI creating registry of banking correspondents: Raghuram Rajan
Reserve Bank of India is in the process of strengthening the network of banking correspondents by creating a registry, Governor Raghuram Rajan said here today.
"We are engaged in strengthening the network of banking correspondents by creating a registry of banking correspondents, giving them the ability to take and give cash on behalf of any bank through the Aadhaar Enabled Payment System which will also give them adequate remuneration, and requiring that they are adequately trained in providing financial services.
"Cash-in-cash-out points will expand soon as the Postal Payment Bank and telecom affiliated payment banks make post offices and telephone kiosks entry points into the financial system," Rajan said at a seminar at the National Institute of Rural Development and Panchayati Raj.
Transfers from bank account to bank account will become easier via mobile through the Unified Payment Interface which is going to be launched shortly, the RBI Governor said.
RBI has created a new institution called 'small finance bank', where "small" refers to the kind of customer the bank deals with, not its size. With 75 per cent of the loans mandated to be below Rs 25 lakhs, the small finance bank is intended to provide services to the excluded, he said.
"Thus far, the licences have been largely given to micro-finance institutions and one local area bank, but there is no reason why these cannot be given to regional rural banks and co-operatives in the future. The hope is that these institutions will maintain a low-cost structure, augmented by technology, to provide a menu of financial services to the excluded," he said.
"Going forward, by the end of the year, the Credit Information Bureau of India will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies," Rajan said.
An important proposal of the government is to give small businesses "Udyog Aadhaar" numbers, which are unique IDs tied to both the entity as well as the promoter. Such IDs could allow small firms to build credit histories with credit bureaus, especially as the histories are tied to specific promoters, he said.
(With PTI inputs)
