While there has been a spate of politico-economic headlines over the last two days regarding former RBI Governor Raghuram Rajan speaking about GST and Demonetisation together for the first time, calling them 'shocks' and 'headwinds' that slowed down India's 2012-2016 growth run, what hasn't been mentioned as much is what he said about some of the other technical points and arguments that were made by the Congress and the Government during the face-off on Demonetisation's 2nd anniversary this week.
Speaking at the University of California Berkeley, after pronouncing his verdict that 7% was the new Hindu rate of growth, Rajan went on to discuss what the Indian economy has to be happy about, particularly emphasising on micro-level successes.
"What should we be proud about in terms of what's good that's happened in India in recent times? I think there's a fair amount of stuff to be happy about?" Rajan starts, adding, "India at 7% growth does create a fair amount of success."
He elaborates in three points, the first of which is: "The government has essentially moved to creating banking accounts for all. Not all these accounts are used but a lot more people have bank accounts than had them in the past and what this does is once it brings people into the system, there's a lot that can be done that's beneficial for development. For example, Direct Benefit Transfer (DBT), instead of someone taking money to a fair price shop to pay for something subsidised you can give them money to buy from anywhere. All this is possible with DBT." He also spoke about DBT in the context of LPG cylinders.
The banking for all initiative being praised by Rajan refers to the Prime Minister's Jan Dhan Yojana, which states on its website that as of October 17, 32.99 crore (32,99,00,000) people have been its beneficiaries.
His second point was about 'e-payments':
"There are a number of stories of micro-level successes in India today. E-payments is an example. Today we have what's called the Unified Payment Interface (UPI) and it's made it possible for anyone who has a bank account to transfer money to anyone else who has a bank account very easily. And because that bridge is available to any of the financial institutions who want to use it, it has allowed for competition. You're not locked into Venmo or Apple Pay like US. There's been a hockey stick increase in UPI in terms of payments."
To elaborate on this point, here is what Finance Minister Arun Jaitley wrote about UPI in his recent note on "Impact of Demonetisation" under the sub-heading 'Effect of Digitisation'
"The Unified Payment Interface (UPI) was launched in 2016 involving real time payments between two sets of mobile holders. Its transactions have grown from Rs. 0.5 billion in October, 2016 to Rs. 598 billion in September, 2018. The Bharat Interface for Money (BHIM) is an App developed by NPCI for quick payment transactions using UPI. It is currently used by 1.25 Crore people. The value of BHIM transactions has gone up from Rs. 0.02 billion in September, 2016 to Rs. 70.6 billion in September, 2018. The share of BHIM transactions in overall UPI transactions is at about 48% in June, 2017", Jaitley had written as part of his case for how tremendous formalisation had resulted from GST and Demonetisation.
Rajan's final 'What India has to be happy' about point, is a damning criticism of the famous UPA-era scams, namely 2G and Coalgate and praise for the improvement in governance since. He says:
"Third example of what's gone right is resources. In the period of very strong growth, resources like spectrum, iron ore mining rights, coal mining rights were essentially not handled very carefully by the government. The resources had increased tremendously in value but the transparency about the allocations and how it was done was fairly non-existent. Because of the furore about how these have been allocated in the past because of many allegations of corruption, India has become much more transparent about allocating resources. It's become difficult to allocate big chunk of government resources without going through a proper auction and that has brought much more transparency into the system and that has been an improvement in governance."