Cautioning against the prevailing economic situation in India, former RBI governor Raghuram said that it is a “worrisome” situation amid growth slowdown. He added that the current fiscal deficit "concealed a lot" and did not reveal the real picture of the economy.
Highlighting that the actual fiscal deficit may be much higher than the combined fiscal deficit of states and the Centre at 7 per cent, Rajan said: "Revenue projections are very optimistic by most counts. What is less noted and something that the auditor general flagged is that a lot of borrowing is going on through off-balance sheet borrowings,” The Print quoted him as saying. He added that the borrowings of the Food Corporation of India should be thought off as a part of fiscal deficit.
Rajan was delivering the O.P. Jindal lecture at Watson Institute, Brown University, on Wednesday. Rajan said there were signs of deep malaise in the Indian economy amid rising levels of debt and distress. “India is losing its economic way, in part because it is centralising power without a persuasive economic vision. We risk wasting the demographic dividend,” the reported cited him.
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According to Rajan, investment banks’ projections indicate that there isn't “going to be a rebound in the very short run”.
Amid GDP growth plunging to the lowest in seven years, the signs of slowdown in Indian economy were more pronounced as the government data on Friday revealed factory output shrank by 1.1 per cent in August. This was the poorest performance recorded in seven years due to a sharp decline in production of capital goods and consumer durable.
At the same time, the Centre has been doling out incentives and extending support to improve consumption. In a relief to companies, the Centre had recently slashed corporate tax rates. In addition, the RBI has been on a dovish mode and cut lending rates five times consecutively to improve liquidity and consumption.
