Interview With : Subramanian Swamy, Rajya Sabha MP and senior BJP leader
Updated on: 21 Jun 2016
BJP leader Subramanian Swamy's thoughts on economic management, post Raghuram Rajan
Raghuram Rajan is to exit the Reserve Bank of India. A number of leaders in the ruling establishment had reservations with his policy decisions, and the man who led this opposition, Rajya Sabha MP and senior BJP leader Subramanian Swamy spoke to Bloomberg TV India in this exclusive interview.
Now that Raghuram Rajan's tenure gets over in September, what pivot do you want the RBI to make under the new leadership?
What we need to address are certain urgent problems. The first is that when you look at the national accounts data — whatever may be their rate of growth and index number and issues connected with the actual level of rate of growth — the fact is undeniable that both the agriculture sector and the industrial sector, particularly the SMEs that constitute a bulk of the industrial output and provide much semi-skilled employment, have been in the negative for some time now. That needs to be rectified first.
The second thing is that there has been a sharp drop in household savings and total investment ratio as a part of GDP. That is because the middle-classes are really feeling the pinch. This is due to inflation and reduction in the rate of term deposits. We have to make some special measures for them. I would like to put money in the pockets of the middle-class, so I would strongly advocate — I am not sure I will be in the driver's seat to do this so I am just suggesting it to the PM — that the PM should abolish income-tax for all sections. There is anyway no I-T for agri income, and rich people have CAs to ensure their I-T is minimal. It is really the middle-class and professionals that face the harassment of income-tax. Removing this would enthuse the country in a big way.
In addition to that, we need to find a way to ensure that the prime lending rate is no higher than 9 per cent, and that should also be the term deposit rate for three years. People should be encouraged to save more.
There are some ministers who believe, like you do, that interest rates were kept too high. Are we to believe, then, that the next RBI Governor will be one with a more benign view on interest rates?
First, it was never in our scheme of things or the Constitution that the RBI can function independently of the government. It is something that Raghuram Rajan took advantage of. I will give my inputs on who should not be the next Governor. They should not select someone who has the legacy of the previous administration. I would like to see a governor who understands that government policy is set by the ruling party which has got the mandate. He may give advice but, in the end, he should implement it.
Banks have not followed through on cutting lending rates, even to the extent the RBI has. Arvind Subramanian's Economic Survey in February put this down to liquidity mismanagement by the central bank. Do you agree that this is the reason why rates did not come down for the borrower?
That's a bureaucratic description of the situation. We need leadership. The banks are mostly government banks, 85 per cent of the deposits are still with PSBs. We should lead them and tell them this is what you have to do and they will do it. That's the scheme of things; otherwise why did we nationalise banks at all?
But bankers led by the SBI argued that small deposit schemes and their high rates were taking deposits away from banks, which in turn kept the cost of funds high for them.