Govt. must reduce borrowing by divesting stake in PSEs: Acharya

Viral Acharya.

Viral Acharya.  

‘Cut subsidies that do not deliver long-term growth’

Reserve Bank of India (RBI) Deputy Governor Viral Acharya said that disinvestment in public sector enterprises (PSEs) would alleviate crowding-out effects of the government’s borrowing in the country.

“One possible solution is for the government to improve the share of capital expenditures, which currently stand at a meagre 14%,” he had said at an event in IIT-Bombay last week on the subject, “Why less can be more: on the crowding-out effects of government financing.” The same speech was delivered at a Federal Bank event in Kochi in November.

He said serious rationalisation could be undertaken including cutting back on subsidies and programmes that are not delivering long-term growth, and instead, focussing on providing education, health and infrastructure. Mr. Acharya had decided to quit the RBI six months before his tenure ends. His last working dayis July 23. “Another way is for the government to reduce its borrowings in the market by divesting more of its public sector enterprise shares,” Mr. Acharya said.

The Deputy Governor argued there could be efficiency gains if there are more private investors playing an effective role in the governance of public sector enterprises, which will also reduce the need for market borrowings by the government and reduce crowding-out. “The much-needed land, labour and agricultural reforms could be undertaken, all of which can help crowd-in private sector growth,” he added.

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Printable version | Apr 4, 2020 2:48:21 PM |

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