New Delhi: Vice Chairman of NITI Aayog Rajiv Kumar has described the ongoing downturn in the financial sector as “unprecedented” while stressing on the need for extraordinary steps to tackle it.

Kumar also highlighted the weak private investments, saying that is no trust within the private sector as nobody wants to lend.

“This is an unprecedented situation for the government. In the last 70 years, we have not faced this sort of liquidity situation where the entire financial sector is in a churn, and nobody is trusting anybody else,” Rajiv Kumar said.

“Within the private sector, nobody wants to lend to anybody else. Everyone is sitting on cash,” he said at a summit on Thursday.

The Niti Aayog VC Rajiv Kumar said the government must do whatever it can to remove apprehensions of the private sector.

“The whole nature of the game has changed in the past four years after demonetisation, GST and IBC. In the earlier period, you had 10, 20, 30, 35 per cent of cash sloshing around which used to help people. That has become much less now,” he said.

Earlier this month, the RBI slashed the repo rate for the fourth time, lowering it to 5.4 per cent to spur growth by providing cheaper loans. Besides, it has reduced the GDP growth rate for 2019-20 to 6.9 per cent, as compared to the earlier estimate of 7 per cent.

The economic growth has been slipping quarter after quarter with January-March period GDP growth slowing to 5.8 per cent in FY19. With most macro indicators showing demand weakness, the growth is expected to have further declined in April-June period. Financial services firm Nomura expect the GDP to moderate to 5.7 per cent in the June quarter.

Numerous suggestions have been made to curb the decline in economic activity that has caused distress across various sectors. Moreover, the industry has demanded sops and relief package from the government to tide over the crisis.