Rajan stresses need for independent institutions with public credibility

Central bank governor says good solid institutions are key to sustained economic growth

Reserve Bank of India (RBI) Governor Raghuram Rajan has stressed the need for independent institutions with public credibility and confidence in the country. Speaking at the Twelfth Convocation of Indira Gandhi Institute of Development Research here on Friday, Rajan pointed to a study which argues it is not resources or people but good and solid institutions that are key to sustained economic growth.

Prime Minister Narendra Modi had said recently that public sector banks should run professionally and there would be no interference from the government, but accountability was essential. “The statement by the government the other day that banks will be free from interference is a landmark statement, which essentially seeks to protect strong commercial decision making by the banks from political interference,” said Rajan.

Finance Minister Arun Jaitley, who was present, said there had been a notable increase in the number of girls in educational institutions.

“These days, it is not the degree or your capability, but also the prestige of the institution from where you get the degree, which adds to you stature and ability,” said Jaitley while addressing the convocation.

Referring to the fact that Jaitley had spent a jail term during the Emergency for upholding his political principles, Rajan told the students present at the convocation: “You should draw inspiration from such a principled career.” On the Swachh Bharat Abhiyan, he said it has been a success as it received wide support. “It is just not physical cleanliness but mental cleanliness, intellectual cleanliness and spiritual cleanliness, too. The notion that if 1.2 billion Indians come together with a focus on public spirit and public work, there is no force on earth that can stop us from what we need to do,” said Rajan.

After the Modi government took over, a large part of Parliament’s time, the Cabinet's time and the government's energy was expended for debating political issues, Jaitley noted.

Jaitley also encouraged suggestions from students for evolving institutions into think tanks. “India deserves to have think tanks in almost every sphere of activities,” he noted.