Crony capitalism hampers economic growth: RBI governor

Tags: News
Reserve Bank Governor Raghuram Rajan today came out strongly against "crony capitalism", saying it kills transparency and competition and hence is harmful to free enterprise, opportunity and economic growth.

"By killing transparency and competition, crony capitalism is harmful to free enterprise, opportunity, and economic growth," Rajan said, delivering a public lecture instituted in the memory of noted bureaucrat Lalit Doshi here this evening.

The academic-turned-central banker also noted that "crony capitalism, where the rich and the influential are alleged to have received land, natural resources and spectrum in return for payoffs to venal politicians" was a major issue in the recent elections.

He further said that one of the greatest dangers to growth of developing economies like India is the middle income trap where crony capitalism "creates oligarchies that slow down the growth."

The only way of avoiding this trap is to strengthen public services, especially those for the poor, he said, adding that financial inclusion drive of the government and RBI is a a key initiative in the same direction.

"Financial inclusion and direct benefits transfer can be a way of liberating the poor from dependency on indifferently delivered public services, and thus indirectly from the venal but effective politician," he said.

Rajan also said that people tolerate crony capitalism and vote for "a venal politician" who perpetuates it because the politician "is the crutch that helps the poor and underprivileged navigate a system that gives them so little access".

The solution to this problem lies only in making the system more efficient, he said.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Time for banks to pass on RBI rate cuts to stakeholders of the economy

    Reserve Bank of India’s decision to cut the repo rate by 25 basis points, from 7.75 to 7.50, is a move in the right direction.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Roopen Roy

The making of a digital Bharat

Exactly 20 years ago, Nicholas Negroponte of MIT Media Labs ...

Zehra Naqvi

For the love of language

A video doing the rounds in social media these days ...

Dharmendra Khandal

‘Poop’ coffee anyone? If civets suffer, so be it

That a drink which proudly associates itself with animal poop ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture