Raghuram Rajan said that the new variant of corona virus is a setback for both Omicron medical and economic activities, but at the same time he has cautioned the government about K shaped recovery.
Commenting on the Indian economy, former RBI governor and noted economist Raghuram Rajan said that the Indian government should be careful in its spending. He has said, ‘There are some dark spots along with bright spots in the Indian economy’, so the government needs to be careful in its spending, so that the fiscal deficit can be prevented from increasing further. The renowned economist also said that the government needs to take more measures to stop the “K shape recovery” of the economy.
What is K shape recovery
In general, technology and large capital companies in K-shaped recovery tend to improve faster than small businesses and industries most affected by the pandemic. Rajan said, “My biggest concern about the economy is about the middle class, small and medium sector and our children.” Rajan is currently a professor at the Booth School of Business at the University of Chicago. He said that there are always dark spots along with bright spots in the economy.
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Rajan’s advice
- Talking about bright spots, health service companies come in this. Apart from these, Information Technology (IT) and IT-allied sectors are doing tremendous business. Unicorns (valued at over $1 billion) have been formed in many sectors and some segments of the financial sector are also strong.
- The former governor of the Reserve Bank said, “If we talk about dark spots, then unemployment, low purchasing power (especially lower middle class), financial pressure of small and medium-sized companies comes in this.” There is also the slowdown in credit growth and the education of our schools.
- Rajan said that the new variant of the corona virus is a setback for both Omicron medical and economic activities, but at the same time he has cautioned the government about K-shaped recovery. Rajan said that we should take all possible measures to prevent K shaped recovery.
- Asked whether the government should take steps for fiscal consolidation, Rajan said 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.
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The growth rate of the Indian economy is estimated to be nine percent in the current financial year. In the last financial year, the Indian economy had declined by 7.3 percent. The Union Budget for the financial year 2022-23 will be presented on February 1. Before the budget, Rajan said that the budget document is a ‘vision’. He said, “I want to see the vision or thinking of five or 10 years for India.” He said that the government should spend where it is needed. But we need to spend carefully, so that the fiscal deficit does not reach very high. Regarding inflation, Rajan said that today ‘inflation’ is a matter of concern for all the countries of the world and India cannot be an exception to it.
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