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Last Updated : Aug 22, 2019 04:59 PM IST | Source: Moneycontrol.com

Using tax money to bail out a slowing economy is antithetic to market economy: CEA Subramanian

Subramanian also said that the possibility of a situation where profits are private and losses are socialised is an anathema to the way a market economy functions.

Kamalika Ghosh @GhoshKamalika

When companies churn out more profits, they do not pay additional taxes. So it is unfair to expect government extending support to them when they are struggling.


Chief Economic Advisor KV Subramanian echoed similar sentiments when asked about his views on the current economic situation.



"Since 1991, we are a market economy. In a market economy, there are sectors which go on a sunrise and then go through a sunset phase. I think we expect the government to use taxpayers' money to intervene every time there is a sunset phase," Subramanian said.


Subramanian also said that the possibility of a situation where profits are private and losses are socialised is an anathema to the way a market economy functions.


On the challenges being faced by the automobile sector, he said: "To say that auto sector slowdown is symptomatic of economic slowdown is not precise. Some sectors are doing well while some others are facing slowdown."


India's automobile sector is in the throes of a major slowdown. India's passenger vehicle industry suffered its worst sales performance in nearly 19 years in July as sales fell 31 percent to 200,790 vehicles last month from 290,931 units a year earlier, according to data released by the Society of Indian Automobile Manufacturers (SIAM). It was the worst sales performance since a 35 percent decline in December 2000.


A persistent liquidity crunch among India's shadow banks that has been the biggest single factor in an auto sales collapse, which some fear may lead to more than a million job losses.


Non-banking finance companies (NBFCs), or shadow banks, have dramatically slashed lending following the collapse of IL&FS in late 2018. NBFCs have in recent years helped fund nearly 55 percent to 60 percent of commercial vehicles both new and used, 30 percent of passenger cars and nearly 65 percent of the two-wheelers in the country, according to rating agency ICRA.



According to the latest data released by the government, growth of eight core industries dropped to 0.2 percent in June. The eight core sectors- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity - had expanded by 7.8 percent in June last year.


The International Monetary Fund (IMF) lowered its FY20 growth forecast for India to 7 percent from 7.3 percent, but said it will expand at 7.2 percent in FY21.




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First Published on Aug 22, 2019 04:53 pm
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