Nobel Laureate and economist Abhijit Banerjee has said India's banking sector is stressed and that the Centre is in no position to bail it out. "Financial sector is the biggest stress point currently. There is no question that the finance sector is something we should worry about, the banking sector is stressed. The government really is not in a position to bail it out, so we are talking about a long process of attrition, that's going to be costly," Banerjee told the media during the 13th Jaipur Literature Festival on Sunday.
He asserted that people had no confidence that the economy would grow, a big reason they were not spending on cars and two-wheelers. "We also know that due to a demand deficit in the economy, cars and two-wheelers are not selling, and those things are signs of a general fact that people lack confidence that the economy is going to grow fast so they are holding back, they are not spending," he said.
He said the slowdown would have an adverse impact on India's long-term plan to alleviate poverty. He also said low job creation in urban sector would hurt the rural sector. "Poverty alleviation has been happening mostly on the strength of the fact that urban sector creates low skill jobs, and a lot of rural sector works in the urban sector and sends money back. That's the peak source of transmission of growth from the urban sector to rural sector. And as soon as the urban sector slows down the rural sector, the people in construction workers don't have as many jobs. All of that will feed back on the rural sector," the 58-year-old Indian-American economist said.
On the question of general "lack of trust" in data, Banerjee said it should be a matter of worry for the Centre that foreign investors were getting "nervous". He added that Modi government needed to provide "true data" to people if it wanted to attract "global" investment. "They don't know where they are going, what they are getting into, I mean those are real issues government should look into. If it wants to have more investment and more involvement in the global economy, then I think it needs to provide true data to people," he said.
On the political situation in the country, the Nobel Laureate said India needed a better opposition which was the heart of any democracy and the ruling party should embrace it. "India needs a better opposition. The opposition is the heart of democracy and the ruling party should want a better opposition to keep it under check," Banerjee said.
He also said there was no co-relation between authoritarianism and economic success. "You can easily argue that Singapore had a successful dictator and can easily come back and talk about Zimbabwe. We can talk about this ad nauseum... At some level authority is an illusion," he said.
The Indian-American innovative MIT economist, his wife Esther Duflo and Harvard professor Michael Kremer jointly won the 2019 Nobel Economics Prize "for their experimental approach to alleviating global poverty".
Edited by Manoj Sharma with inputs from PTI