New Delhi, December 19: Former Chief Economic Adviser Arvind Subramanian has said that India is not facing an ordinary slowdown but it is India's "Great Slowdown" where the economy seems headed for the intensive care unit.
In a draft working paper of the Harvard University’s Centre for International Development, the noted economist wrote that the Indian economy seemed locked in a downward spiral.
“Clearly, this is not an ordinary slowdown. It is India’s Great Slowdown, where the economy seems headed for the intensive care unit,” he wrote.
“Since the Global Financial Crisis, India’s long-term growth has slowed as the two engines propelling rapid growth — investment and exports — sputtered. Today, the other engine — consumption — has also stalled. As a result, growth has plummeted precipitously over the past few quarters,” the paper added.
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His remarks came as India's GDP growth in the second quarter declined to a six-year low of 4.5 per cent.
"Indeed, the economy seems locked in a downward spiral... Best capturing this stark reality is the astonishingly high interest-growth differential. The corporate cost of borrowing now exceeds the GDP growth rate by more than 4 percentage points, meaning that interest on the debt is accumulating far faster than the revenues that companies are generating," Subramanian wrote.
The paper said that the economy would continue its downward spiral if this process is left unchecked.
"The growth of consumer goods production has virtually ground to a halt; production of investment goods is falling. Indicators of exports, imports, and government revenues are all close to negative territory," it said. "These indicators suggest the economy's illness is severe, unusually so. In fact, if one compares the indicators for the first seven months of this year with two previous episodes, the current slowdown seems closer to the 1991 slowdown than the 2000-02 recession."
