Former RBI Governor Raghuram Rajan has suggested to the government before the budget 2022 for strong economic growth. He said that there are some dark spots along with bright spots in the Indian economy. These weaknesses will have to be overcome for a strong recovery in the economy recovering from the epidemic. Rajan, who kept his views clear, said in an interview that in view of these weaknesses, the government should focus on spending carefully. With this, the fiscal deficit can be prevented from reaching very high.
Rajan, currently a professor at the University of Chicago’s Booth School of Business, said there are always dark spots along with bright spots in the economy. My biggest concern regarding the economy is about the middle class, small and medium sector (SME) and our children. All these things will come into ‘Khel’ after the initial revival from suppressed demand. On the other hand, health sector companies come in bright areas. IT and its related sectors are doing great business. Unicorns (valuations over a billion dollars) have been made in many areas. Some parts of the financial sector are also strong.
These weaknesses that need attention
SME and unemployment: Rajan said that unemployment is the biggest problem when it comes to black spots, which is increasing continuously. In addition, lower-middle-class spending capacity and financial pressure on small and mid-sized companies is weighing on demand. This has also affected consumer demand. Children’s education is also included in these spots.
Slow growth of credit: Decline in spending capacity of the people, increasing financial pressure on SMEs and declining consumer demand has led to a decline in the demand for credit. The government should consider accelerating the demand for credit for strong economic growth.
Stopping correction in K-shape: Rajan said that Omicron is a setback for both health and economic activity. He cautioned the government against K-shaped reform, saying that more measures need to be taken to prevent the economy from reforming in this shape. In general, a K-shaped recovery sees IT and large capital companies improving faster than smaller businesses and industries most affected by the pandemic.
10 years thinking necessary: The economic growth rate in the current financial year is estimated to be 9 percent. Before the budget, the former RBI governor said that the budget document is a ‘view’. I want to see five or 10 years’ vision for India.
Wherever it is needed, expenditure is necessary: Rajan said that India’s fiscal position was not good even till the pandemic struck. This is the reason why the Finance Minister can no longer spend with open arms. Wherever it is needed, the government should spend. But, we need to spend carefully so that the fiscal deficit does not reach too high.
Inflation: Said on inflation that today inflation is a matter of concern for all the countries of the world. India cannot be an exception to this.