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Faster GDP growth always debt-driven, could crash at some point: Viral Acharya

24 Aug 2017 Evaluate

Raising concerns over calls of double digit Gross Domestic Product (GDP) growth rate, Reserve Bank of India (RBI) Deputy Governor Viral Acharya has said that the faster growth rate is always debt-driven and could crash down at some point with disastrous consequences. Acharya said that “I think, invariably, the episodes of 9 to 10 per cent growth are all laden with massive debt-based funding of some asset class”. He added that, “I get scared when an economy grows at 9 to 10 per cent because it is not that easy to generate sustainable growth of 9 to 10 per cent. You got to have generated tremendous improvement in your productivity in a short period to be able to deliver that kind of growth.”

Acharya further said that the RBI’s hard work with focus on inflation control and other measures to correct the balance sheets of companies and banks is paving the way for more sustainable growth for over next three to five year horizon down the road and he stressed over immediate clean up of balance sheets with an efficient manner to start growing fast in a sustainable way.

The RBI Deputy Governor also said that the country should not expect that private capex will suddenly and quickly come back after giving the large bad assets in the system, noting that it’s too much to expect. However, he hoped that the companies would start investing again.

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