It's time to eliminate diesel subsidies : Raghuram Rajan tells Centre

With crude oil prices falling globally, the Reserve Bank governor on Monday said it is time to eliminate diesel subsidies completely. However, he cautioned that geopolitical risks - Ukraine and Middle East - continue to remain and these low crude prices may be a temporary phenomenon.

On the macro-economic front, the IIP and CPI data released on Friday point to the fact that recovery is still some time away. But Rajan said India is on path to recovery. “When compared to other emerging markets, what worked well for India is the emergence of a stable government,” he said.

He, however, cautioned that Asia’s third-largest economy needs investment growth to pick up.

Rajan said Friday’s industrial output and inflation data suggested that recovery was “uneven.”

Output from mines, utilities and factories grew by a much slower-than-expected 0.5 percent year-on-year, government data showed on Friday, down from June’s revised 3.9 percent rise. Retail inflation, which the RBI tracks for setting lending rates, edged down marginally to 7.8 percent in August from 7.96 percent a month earlier.

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He also said there was a need to change the management appointment process in public sector banks to make it more transparent. The central bank is in talks with the government to improve governance in public sector banks, Rajan told a banking conference. He said problems that have emerged in recent bank scandals were due to outsourced project evaluation.

On the recent deluge in Jammu and Kashmir, the RBI governor said the central bank will work with other banks to restore normalcy in the region. Rajan seemed pleased with mobile companies and banks coming together to offer mobile banking services, while adding that he expects mobile banking to grow explosively.

With inputs from Reuters