INDIA IN GROWTH RECESSION, SAYS RAGHURAM RAJAN

NEWDELHI: Former Reserve Bank of India (RBI) governor Raghuram Rajan said India is in the midst of a “growth recession” with signs of deep malaise in the Indian economy.

Penning down his recommendations to help the ailing Indian economy out of the ongoing slowdown in the India Today magazine, he called for reforms to liberalise capital, land and labour markets, and spur investment as well as growth.

He also urged India to join free trade agreements judiciously in order to boost competition and improve domestic efficiency.

“To understand what has gone wrong, we need to start first with the centralised nature of the current government. Not just decision-making but also ideas and plans emanate from a small set of personalities around the Prime Minister and in the PMO. That works well for the party’s political and social agenda, which is well laid out, and where all these individuals have domain expertise. It works less well for economic reforms, where there is less of a coherent articulated agenda at the top, and less domain knowledge of how the economy works at the national rather than state level,” Rajan wrote.

“India is in the midst of a growth recession, with significant distress in rural areas.”

He said construction, real estate and infrastructure sectors are in “deep trouble” and so are lenders to it like the non-bank finance companies.

The crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy. Seeking asset quality review of the non-bank finance companies, he said corporate and household debt is rising, and there is deep distress in parts of the financial sector.

Unemployment, especially amongst youth, seems to be growing, as is the accompanying risk of youth unrest. PTI