Former Governor of Reserve Bank of India (RBI) Raghuram Rajan has expressed deep concern about the country’s fiscal deficit. He warned that the rising fiscal deficit is pushing Asia’s third-largest economy to a very “worrisome” state. Eminent economist Rajan made this remark during the OP Jindal lecture at Brown University.
“India is losing its economic way, in part because it is centralising power without a persuasive economic vision. We risk wasting the demographic dividend,” Rajan said.
Uncertainty in economic outlook: Raghuram Rajan
The economist said that the reason for the serious crisis in the Indian economy is uncertainty in the economic outlook. Raghuram Rajan said, “The Indian economy has slowed to a remarkable level after performing well for the last several years. The growth rate in the first quarter of 2016 was 9%.”
‘Failure to detect new avenues of development’
The Indian economy is passing through an inertial patch. The growth rate reached a six-year low of 5% in the first quarter of the current financial year and is expected to be around 5.3% in the second quarter.
Talking about the problems that started it all, Raghuram Rajan said that the problems should have been resolved earlier. He said that the real problem was that India had failed to find new avenues of development.
‘Investment, consumption and export will increase’
Raghuram Rajan said India’s financial crisis should be seen as a symptom and not as a root cause. He attributed the slowdown in growth to the slowdown in investment, consumption and exports and the crisis in the NBFC sector.
A day after government data revealed that factory output shrank by 1.1% in August, the Congress on Saturday hit out at the government over the economic slowdown and claimed that fiscal deficit is not at 3.3% but beyond 8%. Asserting that Indian economy has moved from recession to crisis mode, senior Congress leader Anand Sharma said Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman are “oblivious” to the situation.
“Our sympathies are with the country that we have a finance minister who is clueless and does not understand the ‘e’ of economy or the ‘f’ of finance. Instead of addressing the grim situation confronting the Indian economy, she is blatantly allowing either patronage, promotion of crony-capitalism, huge tax cuts to richest people, no relief to poor,” Sharma said while addressing a press conference at the party office.