Krugman raps note-ban, RBI, strong ₹ for tepid growth
Blaming the Modi government's note-ban, hawkish monetary policy of RBI and a strong rupee for the tepid growth, Nobel winning economist Paul Krugman on Thursday said the 6 per cent GDP expansion is "disappointing" for a country like India.
The noted American economist also questioned whether the favourable demographics which makes the country with the highest working age population in the world, would aid economic growth at all.
"Your 6 per cent growth is actually disappointing. You probably should be doing 8 or 9 per cent," the economist said.
Unlike the advanced economies, it is "conventional macroeconomic issues" which are afflicting India, he said.
Diagnosing what limits the economic expansion, Krugman blamed the sudden demonetisation announced last November, the continuing tight monetary policy and also a strong rupee which makes exports uncompetitive.
"You have an odd demonetisation which created some disruption, you have a monetary policy that looks tighter than one can easily justify. I don't quite understand why it isn't looser," he said. On the continuing hawkish stance of the RBI, he added, "if advanced countries saw the trends of inflation that you see here, you would be talking of substantial loosening of your monetary policy."
Despite inflation trending much below its target of 4 per cent, the RBI has held on to its elevated rates which many experts blame for stifling growth. The GDP grew by 6.1 per cent in the last quarter of fiscal 2017, which was attributed largely to the note ban.