Raghuram Rajan: We need to make taxation more transparent

The RBI Governor Raghuram Rajan at a seminar pointed out the need to make taxation more transparent so that Indian economy is able to attract stable inflow of foreign capital for strong growth.

"We need to make our tax regime more investor-friendly. Let's make taxation more transparent, more predictable. Let's do all the things necessary to allow our businesses to create what is needed," Rajan said at a seminar by a thinktank on global economy.

On Prime Minister Narendra Modi's 'Make in India' plan, Rajan linked the easy and predictable taxation to achieving that goal. "Let's make in India, but for that we need to create the framework, let's make the business easier," Rajan said, adding that there is a need to ensure that more underlying supply side issues are resolved so that demand side is taken care of and prices are under manageable levels.

Growth and Inflation

Further, he called for more coordination between leading central banks, saying there is a need for more optimal use of the monetary policy tols globally as the world is increasingly staring at deflation.

“…What we have to worry about is that...extreme monetary policies including exchange rate intervention as well as unconventional monetary policies have the primary effect of altering your exchange rate and pushing capital,” Rajan said.

To a question on whether India can attain higher growth without inflation, he added: "The answer is no. We have to create underlying supply conditions that would allow us to sort of have much higher demand. In some sense, I see 9 per cent growth as a situation where we are investing tremendous amount and thus creating the supply which will then help the demand.

Steady process

He added: "It is a steady process rather than an overnight process. It will take some time. I don't think that we will go overnight. That (9 per cent growth) is certainly an aspiration we should have, but we need to eliminate the supply constraints, including our human capital."

The RBI Governor emphasised the need to create jobs and improve the quality of our human capital.

He added that India is a very open economy, very dependent on international markets being open. "We buy a lot of energy, lot of commodities. So we need international market to be very open and very competitive.”

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