Economic slowdown 'very worrisome': Rajan

New Delhi: Former RBI Governor Raghuram Rajan has called slowdown in the economy “very worrisome” and said the government needs to fix the immediate problems in power and non-bank financial sectors and come out with a new set of reforms to energise private sector to invest.

Rajan, who was Governor of the Reserve Bank of India from 2013 to 2016 but was denied a second term, also called for a fresh look at the way GDP in India is calculated as he referred to research by Narendra Modi government’s former chief economist Arvind Subramanian about overestimation of growth rate.

“There are a variety of growth projections from the private sector analysts, many of which are perhaps significantly below government projections and I think certainly the slowdown in the economy is something that is very worrisome,” Rajan told CNBC TV18.

India’s economic growth has slowed to 6.8 per cent in 2018-19 – the slowest pace since 2014-15, and various projections by private experts and the central bank estimate that the GDP growth in the current year will be less than government estimate of 7 per cent.

In ominous signs that the slowdown may be deep, the auto sector is facing its worst crisis in two decades with reports suggesting thousands of job losses in the automobile and ancillary industry, real estate sector has huge unsold inventory, while fast-moving consumer goods (FMCG) companies have reported a decline in volume growth.

Rajan said “a fresh set of reforms” are now needed to boost the economy and growth rate.

“We need a new set of reforms, which energise the private sector to invest. Sops, stimulus of one kind or the other are not going to be that useful in the longer-term especially given the very tight fiscal situation that we have. Instead, bold reforms, well thought of, not jumping off the cliff, but really seriously thought out reforms in a variety of areas which energise the Indian people, energise the Indian markets and energise Indian business.

“This is what we need today and I really hope we put our best minds to think about this because absent that my sense is that we are in for not so good times,” he said.