Former Reserve Bank of India governor Raghuram Rajan on steps India needs to take to reverse the economic decline
India should focus on the revival of the construction sector and step up infrastructure spending despite financial constraints, in order to reverse the economic decline post-Covid, prescribes former Reserve Bank of India governor Raghuram Rajan.
In a recent interview with Indian news portal ‘The Wire’, Rajan said the country is facing an unprecedented economic crisis. The construction sector—the country’s biggest job creator—as well as infrastructure growth hold the key to economic revival, he says.
It’s pertinent to mention here that way back in 2001, the Golden Quadrilateral highway project implemented by Prime Minister Atal Bihari Vajpayee government scripted India’s biggest infrastructure growth story. The project helped connect the major industrial, agricultural and cultural centres across the four major metros—Delhi, Kolkata, Mumbai and Chennai.
Similarly, India’s construction sector that relies mostly on unorganised migrant labour has been for decades one of the largest contributors to the country’s economic activity—from giving employment to over 30 million people to stimulating local infrastructure development.
Rajan also feels that the recent US$ 264 billion package announced by Prime Minister Narendra Modi government is inadequate for India as the country, which has been facing an “economic drift” for the past 3-4 years.
“The recent US$ 264 billion package announced by Prime Minister Narendra Modi government is inadequate for India as the country has been facing an “economic drift” for the past 3-4 years”
“I think it is particularly so in the case of India because we have years of economic drift in which our growth had slowed, our fiscal deficit has gone up. There is a lot more we need to do to put the economy back on track,” he says.
The top economist, currently a Professor of Finance at the University of Chicago Booth School of Business in the US, says that the financial sector in India has been in deep distress and calls for better quality management of public sector banks to combat the economic crisis.
“We have got to repair places in the economy that need repair. This includes some of the big firms, this includes banks, and of course this includes MSMEs. We need to provide for recovery, which means some kind of stimulus so as to get the recovery going. And we need reforms,” he stresses.
To deal with the situation, Rajan has also urged the government to consult the best people from the opposition parties as well because “the problem cannot be handled by the Prime Minister’s Office alone”.
And on giving free food grains to unemployed migrant workers, the former chief economist of International Monetary Fund says that it’s just not enough and they should be given cash payouts to tide over the crisis. “They also need vegetables and cooking oil and, most importantly, money and shelter,” he says.
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