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BW Businessworld

RBI Governor Cautions On 'Make In India' Campaign

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Reserve Bank of India Governor Raghuram Rajan has sounded a word of caution about the new government's "Make in India" campaign, which follows an export-led growth path similar to China.
Rajan said instead it should be "Make for India" that will produce for the domestic market.
He also pitched strongly for budgetary incentives for household savings that could help ensure that the country's investment is largely financed from domestic savings.
Domestic demand has to be financed responsibly as far as possible through domestic savings, he added.
Delivering the Bharat Ram Memorial Lecture on "Make in India, Largely for India", Rajan commended the government's aim of making more in India for which access to finance should be made easier.
"There is a danger when we discuss 'Make in India' of assuming it means a focus on manufacturing, an attempt to follow the export-led growth path that China followed. I don't think such a specific focus is intended," he said at the event organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).
The governor's remarks assume significance in the context of the manufacturing campaign being a key project of Prime Minister Narendra Modi, who swept to power six months ago promising to oversee an economic revival.
Modi had announced the ambitious "Make in India" programme in his Independence Day speech.
The governor said that the world as a whole is unlikely to be able to accommodate another export-led China. Industrial countries themselves have been improving capital intensive flexible manufacturing, so much so that some manufacturing activity is being "re-shored".
Any emerging market wanting to export manufacturing good will have to contend with this new phenomenon.
India's industrial output unexpectedly contracted 4.2 per cent year-on-year in October, dragged down by a fall in manufacturing and the capital goods output, government data showed on Friday.
Unfazed by criticism that the central bank is keeping interest rates high, Rajan said the role of regulators is not to boost the Sensex.
"Financial stability sometimes means regulators, including the central bank, have to go against popular sentiment. The role of regulators is not to boost the Sensex but to ensure that the underlying fundamentals of the economy and its financial system are sound enough for sustainable growth," Rajan said.