Former Reserve Bank of India (RBI) Governor Raghuram Rajan has said that the recently released quarterly GDP growth numbers for the first quarter of FY21 are "alarming" adding that the government needs to "be frightened out of its complacency" and take meaningful action to put the economy back on track.
Rajan, in a LinkedIn post, stated that holding back another stimulus package for later will only prove to be a self-defeating strategy.
He further opined that the relief measures provided by the government have become all the more important in the light of the ensuing situation, however, they have been "meager".
He highlighted that the steps taken by the Centre, such as free food grains to poor households; and credit guarantees to banks for lending to small and medium (SMEs) firms, are the areas where the "take down has been patchy."
Rajan said the government's "reluctance to do more today seems paltry" as it wants to conserve resources for a possible future stimulus is "self-defeating."
"Government officials who hold out the possibility of a stimulus when India finally contains the virus, are underestimating the damage from a more shrunken and scarred economy at that point," Rajan said.
Terming the 23.9 per cent contraction in the economy as "alarming," Rajan, currently a professor at the University of Chicago, said the numbers will "probably be worse when we get estimates of the damage in the informal sector."
The former RBI governor stated that the (23.9 per cent) contraction in the Indian economy, when compared with a drop of 12.4 per cent in Italy and 9.5 per cent in the US, is even "worse off" than what comparisons suggest.
The US and Italy are two of the most Covid-affected advanced countries. India is the worst-hit nation after the US, setting new records for daily coronavirus cases every day.
Further talking about the raging COVID-19 pandemic in the country, Rajan expressed that "the discretionary spending, especially on high-contact services like restaurants, and the associated employment, will stay low until the virus is contained."