Y.V. Reddy, former Governor of the Reserve Bank of India (RBI), on Wednesday said that the Union government should impose a minimum research and development (R&D) expenditure on itself.
He was interacting with the students of T.A. Pai Management Institute (TAPMI) at its 20th Leadership Lecture, here.
According to a press release issued here, Dr. Reddy said that all advanced countries such as U.S., U.K., Russia, China, spent a lot of money on R&D.
The government should learn from these countries. He also said that it is unadvisable to impose minimum spending limits on Indian corporates with regard to the same.
On the issue of spending, he said that it should be undertaken only by the government and the reliance on private sector and public sector banks should reduce. The strength of public sector banks was in funding working capital and small loans rather than financing infrastructure projects. “The way forward lies in structuring finances better,” he said.
Regarding the possibility of having different inflation indices for different states, he said that even though there were a lot of deficiencies in the indices that measure inflation, it was not favorable to have separate indices for different states.
For policy framing purposes, it was ideal to have only one index such as the Consumer Price Index, the Wholesale Price Index or the Producer Price Index as more indices only complicated matters.
To a query, he said that that there existed no tradeoff between inflation and growth and that the RBI had to harmonize with the government when it came to policies, maintain operational autonomy and coordinate when it came to structural changes.
On external debt management and whether the percentage of external debts maturing after a year was a worrying sign, he said that the presence of sufficient amount of reserves was enough to not cause any worry.
He also said that the recommendation of the Financial Sector Legislative Reform Commission (FSLRC) to shift the regulatory power of money market from RBI to SEBI was not important.
The emphasis was on cooperation and not separation. FSLRCs should be managed by the RBI as it had the necessary tools to handle a financial crisis, should it arise, Dr. Reddy said.
R.C. Natarajan, Institute Director, V. Leeladhar, former Deputy Governor of RBI, H. Vinod Bhat, Vice Chancellor of Manipal University, T. Ashok Pai, Managing Director of Canara Land Investments Ltd., were present.
