Regarding the country’s declining economy, former Reserve Bank Governor Raghuram Rajan has advised the Modi government that the Indian economy may decline further if the situation is not yet handled. Raghuram Rajan said that the GDP figures for the first quarter of the year 2020-21 are an alarm for the destruction of the economy. Therefore, the government should be alert. Former RBI Governor Raghuram Rajan made this suggestion in a post on his LinkedIn page. Rajan said, “Unfortunately the activities which had grown very fast in the beginning have now cooled down again.
Rajan wrote in a post on his LinkedIn page, “Such a huge decline in economic growth is a warning for all of us.” GDP in India declined by 23.9 percent. (This decline may be further exacerbated after the unorganized sector figures). On the other hand, the countries most affected by the Kovid-19 have fallen by 12.4 percent in Italy and 9.5 percent in America. He said that a good thing due to such a poor GDP figure could be that the official system would now come out of a state of complacency and focus on some meaningful activities. Rajan Filahal is a professor at the University of Chicago.
Suicidal government strategy
Rajan has said that the government is following a strategy to save resources to give incentive packages in future, which is suicidal. The government is thinking that they will give relief packages after the virus is controlled, but they are underestimating the seriousness of the situation. By then, the economy will suffer a lot.
Government should increase relief package
Look at the economy like a patient
Raghuram has said that if you look at the economy like a patient, then it needs constant treatment. Without the relief package, people will give up food, they will expel children from school and send them to work or begging, pledge their gold to take loans, EMI and house rent will go up. Similarly, in the absence of relief, small and medium companies will not be able to pay their employees, their debt will increase and eventually they will be closed. In this way, by the time the virus is controlled, the economy will be ruined. He demanded an immediate relief package from the government and increased its amount.
See economic stimulus as a tonic
The former RBI governor said that now consider economic stimulus as a ‘tonic’. “When the disease ends, the patient will be able to get out of his bed fast.” But if the patient’s condition will worsen too much, then the incentive will not benefit him. Rajan said the recent improvements in areas such as automobiles are not evidence of V-shaped reforms (the faster the decline, the faster the recovery). He said, “This is a pressing demand. In a damaged, partially functioning economy, when we reach the level of real demand, it will cease.
Rajan said that there was a slowdown in the economy even before the epidemic and there was pressure on the financial condition of the government. In such a situation, the authorities feel that they cannot afford both relief and incentives. He said, “This thinking is pessimistic. The government will have to increase its resources in every possible way and it should spend as wisely as possible. He said that the government will have to take every step that can take the economy forward without additional expenditure.
World will recover from pandemic before India
The former RBI governor said that India needs strong growth not only to fulfill the aspirations of the country’s youth but also to keep the neighbors quiet with whom tensions are rising. He said that in some states, ‘underappreciated reforms like postponement of labor protection law will increase neither the enthusiasm of industries nor the workers. Rather it will spoil the name of reform. Rajan suggested that reforms could be made part of the stimulus. If their implementation is not immediate, its deadline can be fixed. This will also strengthen the investor perception. Rajan said that the world will recover from the epidemic before India. In such a situation, India can also move forward through exports.