RBI GOOFED up note ban, says former RBI Guv

New Delhi, Sep 22: Former RBI Governor C Rangarajan on Friday said the stimulus package being contemplated by the government to boost economy should focus on raising capital expenditure to catalyse private investment.He also made a case for recapitalisation of public sector banks (PSBs) so that they could provide more funding to the private sector.

Speaking on the sidelines of an Assocham conference here, he said that India would need to grow by at least 7 per cent in the remaining three quarters of the current fiscal to achieve a growth rate of 6.5 per cent in the current fiscal.

On demonetisation, he said adequate preparation by the central bank could have reduced the pain which people had to undergo on account of ban on high value notes last November.

"To me it looks like it (growth) has bottomed out, now it will pick up. But even to get 6.5 per cent (growth) for the year as a whole, the economy needs to grow at 7 per cent in the next three-quarters.

"So my own estimate is that for the year as a whole, probably the rate of growth will be 6.5 per cent," he said.

Responding to questions on the stimulus package, he said it should focus on increasing public expenditure with the aim to reinvigorate private investments.

"Two or three things can be done. First is, there have been a number of stalled projects, and the low hanging fruit is to ensure that these stalled projects are activated and those stalled projects which are viable must be immediately made operational.

"Secondly I think the banking system needs to be recapitalised so that it can provide additional credit for investment as well," he added.

Rangarajan cited temporary or transient factors like the introduction of GST or demonetisation as the reasons behind the slowdown in the Indian economy.

The government is working on additional measures to bolster economy, Finance Minister Arun Jaitley said earlier this week.

India's GDP growth hit a three-year low of 5.7 per cent in the June quarter.

The minister said an announcement with regard to the additional steps will be made after consulting Prime Minister Narendra Modi.