Interview | Expect K-shaped, not V-shaped, recovery: Part 1

According to the latest Economic Survey, a V-shaped recovery is taking place in the Indian economy. The IMF’s projection for the next fiscal year starting April 2021 is a GDP growth of 11.5%. Finance Minister Nirmala Sitharaman’s Budget has enthused the stock market.

The question is, are we really going to see a demand in the market and impressive growth?

In an exclusive 3-part interview to Shobha Warrier, Dr. Rakesh Mohan, president and Distinguished Fellow of the Centre for Social and Economic Progress, (formerly Brookings India), and former deputy governor, Reserve Bank of India, analyses the Indian economy, banking reforms, the RBI’s role, etc.

In the first interview, Dr. Mohan analyses the Indian economy, banking reforms, the RBI’s role, etc. Talking about banking reforms he said, “the point is that the Indian tax system has not been exhibiting any buoyancy whatsoever, for more than a decade, which is very strange. We have had an average growth of at least 6% over the last decade, the pre-Covid days. And with all the tax reforms in direct tax, indirect tax, GST, etc., there should have been some buoyancy.”

Read Part 1 | ‘Expect K-shaped, not V-shaped, recovery’

In the second interview, Rakesh Mohan while analysing the banking sector said, “yes, there is clearly a need for some good large public sector banks for financial stability purposes and other social purposes. But there is no need for so many public sector banks. My suggestion would be, they should start with some of the remaining small public sector banks, and the easiest way of privatising them would be to take the government equity to below 50%.”

Read Part 2 | ‘It would be a mistake to allow private sector corporate groups to own banks’

In the last part, Dr Rakesh Mohan talks about NPAs and banking sectors. On public sector banks and NPAs, he said, “Yes, by the end of the 1990s, public sector banks had large NPAs, but the balance sheets were then totally cleaned up in the following decade. By around 2007-2008, if you look at the performance of public sector banks and new private sector banks, they were just about equal. If a huge improvement on the balance sheet of public sector banks could be done over a decade, the interesting question is, what happened after 2009-2010?”

Read Part 3 | ‘We should be moving towards Aatmavishwas Bharat rather than Aatmanirbhar Bharat’