Raghuram Rajan warns about the 'worrisome' economic situation of India: Report

Former RBI governor Raghuram Rajan has warned about the 'worrisome' economic situation of India, reports The Economic Times.

He pointed out that the fiscal deficit of the country 'conceals' a lot and might push down Asia's third-largest economy.

"India has slowed considerably from the go-go years before the financial crisis, but even from the 9 percent growth in the first quarter of 2016." Rajan said while delivering a lecture at Brown University.

According to the Index of Industrial Production (IIP) data released by the government on October 11 shows that India's industrial output contracted by 1.1 percent month-on-month (MoM) in August.

According to the data released by the government on September 2, output of coal, crude oil, natural gas and refinery products recorded negative growth in July.It had dropped to 2.1 percent in July.

Moody's Investors Service on October 10 had slashed its 2019-20 GDP growth forecast for India to 5.8 percent from earlier estimate of 6.2 percent. Moody's said the drivers of the deceleration are multiple, mainly domestic and in part long-lasting.

The RBI had also cut its GDP growth forecast for full year (FY20) to 6.1 percent from 6.9 percent. The central bank also reduced April-June quarter 2021 GDP growth forecast by 0.2 percent to 7.2 percent.

GDP growth for Q1FY20 at 5 percent was significantly lower than projected, the RBI had said.

Rajan also pointed out that the real problem is that the country hasn't figured out "new sources of growth" and that "legacy problems" were not addressed.

He also spoke about the demand and investment slowdown along with the non-banking financial companies (NBFC) liquidity crisis.He attributed it an "ill-conceived demonetisation and the poorly executed GST roll-out."

The recently appointed chief of the International Monetary Fund (IMF) had also said that the global economy is in the midst of a "synchronised slowdown", effects of which have particularly been felt in countries such as India.