NITI Aayog vice-chairman Rajiv Kumar blames former RBI chief Rajan’s actions of cleansing banking sector of NPAs for slowdown of economy.
New Delhi: The shock to the economy was not caused by Prime Minister Narendra Modi’s demonetisation gamble in November 2016, but because of the policies followed by former RBI governor Raghuram Rajan, NITI Aayog vice-chairman Rajiv Kumar has told ThePrint.
By focusing on cleansing the banking sector of its non-performing assets, Rajan had effectively rendered the economy comatose, Kumar said.
As a result, the banks had no money to lend to industry when they most needed it. So, all through 2016, much before demonetisation took place in November, the economy was on a downward spiral, he added.
“When you give crocin to an ill person every two hours instead of the prescribed eight, then the person will become comatose,” said Kumar.
He emphasised that the policies followed by the former RBI governor had had the same effect.
Kumar would not say whether demonetisation’s effect was to exacerbate the shock. “These are two different processes. We don’t know. We don’t have the data for that,” he said.
The NITI Aayog leader, a widely-acknowledge defender of demonetisation (“I have said that prime minister Modi’s gamble was a very good one”) also defended the falling rupee, saying that it had to find its level, and there was no real distress associated with it.
When the rupee lost 25 per cent in 2013 that was a cause of concern, but not today, he said.
Kumar also said he had no problems accepting the Sudipto Mundle report commissioned by the Ministry of Statistics & Implementation, whose recently generated data series awarded the Manmohan Singh-led UPA a fantastic 10.3 per cent growth in 2013.
“Question is, what happened after that quarter. The data shows that the economy went into a free fall, until it had touched 5.3 per cent in the April-June quarter in 2014 around the time of the elections. I have always maintained that Mr Modi inherited a very bad economy,” Kumar said.