New Delhi: ‘India’s economy is far worse than two of the most COVID-affected advanced countries — the US and Italy’, asserted former Reserve Bank of India (RBI) governor Raghuram Rajan. Referring to the 23.9% contraction in the economy, Rajan, in a post on Linkedin, said that the first quarter of FY 2020-21 ‘should alarm us all’ and the government and bureaucrats need to be frightened out of their complacency and into meaningful activity.Also Read - RBI Slaps Rs 1 Crore Penalty on State of India Over Non-Compliance
“The recently released quarterly GDP growth numbers for the first quarter of FY2020-21 should alarm us all. The 23.9% contraction in India (and the numbers will probably be worse when we get estimates of the damage in the informal sector) compares with a drop of 12.4% in Italy and 9.5% in the US, two of the most Covid-affected advanced economies,” he wrote. Also Read - Fuel Prices Hiked for 6th Day: Petrol Crosses Rs 110, Diesel Rises Above Rs 100. Check Price in Your City
Furthermore, he stated,”The pandemic is still raging in India. So, discretionary spending, especially on high-contact services like restaurants, and the associated employment, will stay low until the virus is contained.” Also Read - Bank Holidays October 2021: Banks to Remain Closed For up to 21 Days Next Month | Full List
Rajan, currently a professor at the University of Chicago, advised that India needs strong growth, not just to satisfy the aspirations of our youth but to keep our unfriendly neighbors at bay. “No doubt, the government and its bureaucrats are working hard as always, but they need to be frightened out of their complacency and into meaningful activity. If there is a silver lining in the awful GDP numbers, hopefully it is that.”
Rajan said economic stimulus was like a tonic, but “if the patient has atrophied, stimulus will have little effect”.
He also opined that the government will have to expand the resource envelope in every way possible, and spend as cleverly as possible. “It also has to take every action that can move the economy forward without additional spending. All this requires a more thoughtful and active government. Unfortunately, after an initial burst of activity, it seems to have retreated into a shell”, said the former RBI governor.