What Must India Do To Prevent An Economic Catastrophe? Raghuram Rajan Provides Some Solutions

“I’m very worried about the extent of the catastrophe we’re facing … the government must consult opposition talent … it can’t all be done by PMO … we must pull out all stops … if more is not done, the economy will be a shadow of it’s former self”, said former Reserve Bank of India governor Raghuram Rajan in an interview to The Wire.

In candid and outspoken remarks, Rajan, who is also a former chief economic advisor to the government of India and former chief economist of the IMF, said the threat to India's economic prospects was such that the government must consult the best talent in the country and not worry about who is across the political aisle. He said the situation could get very ugly and it cannot all be handled by the PMO.

Rajan told The Wire the challenge was not just to repair the damage done by the coronavirus and the lockdown but the preceding 3-4 years of economic drift. Asked if a government that was responsible for the drift and doesn’t even accept the economy had been drifting could be the one to battle it, the former RBI governor said there was a lot of capable talent in the country and the government should call on it. Dr. Rajan said this included former BJP finance ministers, although he did not take Yashwant Sinha’s name. Asked if he was referring to both Sinha and P. Chidambaram Dr. Rajan did not demur but said the government should not worry about political differences at a time like this.

Rajan said the task of recovery involved reviving the construction sector and pushing forcefully ahead with infrastructure development. He said the challenge of recovery was as important as the fight against the virus and the strategy to emerge out of the lockdown.

In a 45 minute interview to The Wire – the first he has given since details of the government’s Rs 20.9 lakh crore survival package were made public by the finance minister – Rajan was asked if the government’s package was an impressive or inadequate response to the economic challenge facing the country. He said almost any response is inadequate, particularly so in India’s case. He added the government must pull out all the stops.

Asked what would be the state of the economy a year from now if the government did not announce further measures, Rajan said it would be heavily constrained. He pointedly added it would be a shadow of its former self.

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