Former Reserve Bank of India Governor Raghuram Rajan on Monday called the slowdown in the economy “very worrisome”, CNBC-TV18 reported. Rajan advised the government to immediately fix problems in the power and the non-bank financial sectors and enact reforms to spur private sector investment.
Rajan’s statement came the day the Economic Advisory Council to the Prime Minister recommended a Goods and Services Tax Council-like mechanism for the Centre and states to strategise public expenditure for maximum impact. “The key question today is whether we are on a 7% GDP growth rate trend, or a 6% trend,” said the council’s Chairperson Bibek Debroy. Questions were raised within the advisory council on whether the slowdown was cyclical or structural in nature, he added. The government is battling decreasing government revenues, a crisis in the automobile industry, and reduced consumer demand. To discuss this slowdown, the Prime Minister’s Office and the finance minister reportedly met various stakeholders last week.
“There are a variety of growth projections from the private sector analysts, many of which are below, perhaps significantly below government projections and I think that certainly the slowdown in the economy is something that is very worrisome,” Rajan told CNBC TV-18.
The economist referred to former Chief Economic Adviser Arvind Subramanian’s research and called for a new look at the way Gross Domestic Product is calculated. Subramanian has argued that India’s Gross Domestic Product for 2011-2017 was overstated by 2.5 percentage points.
“I would suggest, and I have been saying this for some time, we need a fresh look from an independent group of experts at the way we compute GDP and make sure that we are not in a sense having GDP numbers that mislead and cause wrong kinds of policy actions,” Rajan added.
The former central bank chief said sops or “stimulus of one kind or the other” would not be useful in the long term especially given India’s fiscal situation. “Instead, bold reforms, well-thought-out, not jumping-off-the-cliff but seriously thought-out reforms in a variety of areas which energise the Indian people, energise the Indian markets and energise Indian business,” he added. “This is what we need today and I really hope we put our best minds to think about this because absent that, my sense is we are in for not-so-good times.”
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