RBI governor Raghuram Rajan feels the implementation of the Goods and Services Tax will be good for the economy. Speaking at the Presidency University in Kolkata, he said, “Broadly speaking, there are two major advantages that GST will bring. Firstly GST could increase the tax base because it will bring more people under the tax net. Secondly, GST will reduce the barriers between states. It will make the country a common market.
Commenting on the non-performing asset level in the banking system, Rajan added that banks have devised a mechanism to avoid over-borrowings by large borrowers, mentioning that the RBI maintains a database shared among banks. He said Indian banks have the right kind of leveraging, adding that “those who said that the banks have no capital requirements are not sensible.” Citing the instance of Indian economy, he said foreign share in government debt is 3%-3.2%, which is reasonable. “It is easy to be tempted by easy money from outside and then get into problems later. There is a need for the golden mean,” he said.
Showing the need for debt in society, Rajan said it was also responsible for creating antipathy among entities. He also added that cutting interest rates to rock bottom levels was not a good idea. “Better to have growth in real activity rather than a financial market boom due to distortion in prices.”