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India in growth recession: Raghuram Rajan

Amid India’s economic growth slowed to a 6-year low of 4.5% in second quarter of current fiscal, former Reserve Bank of India (RBI) governor Raghuram Rajan has said India is in the midst of a growth recession with signs of deep malaise in the Indian economy that is being run through extreme centralisation of power in Prime Minister’s Office and powerless ministers. In order to boost competition and improve domestic efficiency, he urged India to join free trade agreements judiciously.

He mentioned ‘to understand what has gone wrong, we need to start first with the centralised nature of the current government. Not just decision-making but also ideas and plans emanate from a small set of personalities around the Prime Minister and in the Prime Minister’s Office (PMO). That works well for the party’s political and social agenda, which is well laid out, and where all these individuals have domain expertise. It works less well for economic reforms, where there is less of a coherent articulated agenda at the top, and less domain knowledge of how the economy works at the national rather than state level.’

Meanwhile, he added that previous governments may have been untidy coalitions but they consistently took path of further economic liberalization. Besides, he said Indi’s construction, real estate and infrastructure sectors are in deep trouble and so are lenders to it like the non-bank finance companies. The crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy.

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