Former Reserve Bank of India (RBI) governor Duvvuri Subbarao said that India’s economy may decline by 5 percent in the current financial year (FY21) but may expand by around 5 percent in the next financial year (FY22). He said ‘I do believe that getting up to 5 per cent in FY22 is quite probable. The reason I say that is because this (COVID-19) is not a natural disaster. Our factories are still standing, our infrastructure and transport systems are still there.
He stated ‘Once the lockdown is lifted and the economy is given a green signal to restart, I am sure that we can ramp up pretty soon and reach at least 5 per cent (growth rate).’ Further, he said a sharp decline in growth would mean a disruptive adjustment even for a rich country. He added for a poor country like India, it would mean enormous pain and hardship for millions of low income persons, firms and enterprises, especially in the informal sector, going bankrupt and it could mean its financial stability becoming vulnerable.
Besides, amid this grim situation, the former RBI governor said he sees two silver linings -- relative stability of the external sector and bumper agricultural crop production, which would support the economy. Commenting on the over Rs 20 lakh crore fiscal stimulus package announced by the government, he said within the fiscal constraints of the government, they have done a good job. He also lauded the government's decision of additional borrowing in this fiscal. He mentioned ‘I, for one, believe that the government should borrow more in order to spend more. That is a moral and political imperative. But I don't support the view that the government should resort to open ended borrowing.’
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