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Govt's strategy is 'self-defeating': Raghuram Rajan

Sep 07, 2020 16:20 IST

Former RBI Governor Raghuram Rajan on Monday said that the 23.9% drop in the GDP should alarm us all. He pointed out that the contraction in India is even worse than a drop of 12.4% in Italy and 9.5% in the US, two of the most Covid-affected countries. Rajan said the government’s strategy to conserve resources today for a possible future stimulus is 'self-defeating'. The government needs to be frightened out of their complacency and take meaningful action. The eminent economist stressed that the recent pick-up in sectors like auto is not an evidence of the much-awaited V-shaped recovery. "It reflects pent-up demand, which will fade as we go down to the true level of demand in the damaged, partially-functioning, economy," he noted. He also suggested that reforms can be a form of stimulus, and even if not carried out immediately, a timeline to undertake them can boost current investor sentiment. "The world will recover earlier than India, so exports can be a way for India to grow," he said.

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