After India recorded a sharp economic recession in its GDP in early September, former Reserve Bank of India Governor Raghuram Rajan took to LinkedIn and termed the 23.9 percent fall as “alarming.”
With discretionary spending expected to stay low until the virus is contained, government-provided relief becomes all the more important, Rajan was quoted as having said by The Hindu, adding that the government’s reluctance to do more today to conserve resources for a possible future stimulus is a “self-defeating” strategy.
Rajan said that the 23.9% contraction in India, will probably be worse when estimates of the damage in the informal sector come out, compared with a drop of 12.4% in Italy and 9.5% in the United States — two of the most COVID affected advanced countries.
“Without relief measures, the growth potential of the economy will be seriously damaged,” he said in his post.
Instead of claiming there is a V-shaped recovery as was suggested by the BJP Leader Subramanium Swamy, Rajan said, they should wonder why the United States, despite spending over 20% of GDP in fiscal and credit relief measures, is still worried the economy will not return to pre-pandemic GDP levels by the end of 2021.
“Temporary half-baked ‘reforms’, such as the recent suspension of labour protections in a number of states, will do little to enthuse industry or workers, and give reforms a bad name,” he said.
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