Economic slowdown 'very worrisome', new set of reforms needed: Former RBI Governor Raghuram Rajan
New Delhi, Aug 19: Former RBI Governor Raghuram Rajan has called slowdown in the economy "very worrisome" and said the government needs to fix the immediate problems in power and non-bank financial sectors and come out with a new set of reforms to energise private sector to invest.
Rajan, who was Governor of the Reserve Bank of India from 2013 to 2016 but was denied a second term, also called for a fresh look at the way GDP in India is calculated as he referred to research by Narendra Modi government's former chief economist Arvind Subramanian about overestimation of growth rate.
"There are a variety of growth projections from the private sector analysts, many of which are perhaps significantly below government projections and I think certainly the slowdown in the economy is something that is very worrisome," Rajan told CNBC TV18.
India's economic growth has slowed to 6.8 per cent in 2018-19 - the slowest pace since 2014-15, and various projections by private experts and the central bank estimate that the GDP growth in the current year will be less than government estimate of 7 per cent.
In ominous signs that the slowdown may be deep, the auto sector is facing its worst crisis in two decades with reports suggesting thousands of job losses in the automobile and ancillary industry, real estate sector has huge unsold inventory, while fast-moving consumer goods (FMCG) companies have reported a decline in volume growth.
"You can hear businesses all around worrying and complaining out loud that they need some kind of stimulus," he said.
Rajan said "a fresh set of reforms" are now needed to boost the economy and growth rate.
"We need a fresh set of reforms informed by view on what we want India to be and I would love for that view to be articulated at the very top (that) here is the kind of economy that we want. One-off programs here and there don't amount to a comprehensive reform agenda for the economy," he said, adding borrowing in international markets is not really a reform but a "tactical action".
"What we really need is an understanding of how we are going to propel this country by the two or three percentage points greater growth that it needs and that needs fixing the immediate problems such as in the power sector, such as in the non-bank financial sector and those need to be done yesterday, not in the next six months, it is very important that those be tackled immediately," he said.
Rajan advocated for a new set of reforms to get the private sector to invest.
"We need a new set of reforms, which energise the private sector to invest. Sops, stimulus of one kind or the other are not going to be that useful in the longer-term especially given the very tight fiscal situation that we have. Instead bold reforms, well thought of, not jumping off the cliff, but really seriously thought out reforms in a variety of areas which energise the Indian people, energise the Indian markets and energise Indian business.
"This is what we need today and I really hope we put our best minds to think about this because absent that my sense is that we are in for not so good times," he said.
The former governor also drew attention to former chief economic advisor Arvind Subramanian's research that GDP growth was overestimated by 2.5 per cent during 2011-12 and 2016-17.
"I also think that we should pay attention to some of the arguments made by the former chief economist Arvind Subramanian that in fact we may be overestimating growth with some of the new GDP data and I would suggest - I have been saying this for some time - we need fresh look from an independent group of experts at the way we compute GDP and make sure that we are not in a sense having GDP numbers that mislead and cause the wrong kinds of policy actions," he said.
On the ongoing global economic slowdown, Rajan said that in comparison to the 2008 financial crisis, the banks are better levered across the globe.
"History never repeats. So, I think there is more leverage than there was in 2008 but it is not in the same places. Banks are less levered than they were then. On the other hand, some corporate sectors, certainly in the United States are more levered, certainly in China are more levered and of course governments are more levered," he said. "So, leverage was the big factor in 2008, it is different today. Not necessarily better, but different."
Rajan said that he can't predict another big financial crash but if it comes, it will be from different sources.
"The big issue today is not so much the financial sector frenzy, there is some but real (issue) is trade and global investments and the worries are that if we don't pay enough attention, the old global order is going out of the window and there is nothing really to replace it to keep countries from doing things that serve their own interest rather than the global interest. So, it is a different world," he said.
Asked about 2008 meltdown repeating, he said: "Do I predict a big crash coming? I don't know but I do think that it is going to come from different sources and simply fixing the old problems is not going to prevent the new ones".
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MP HC sets up judicial commission to probe water contamination in Indore
Indore (PTI): The Indore bench of Madhya Pradesh High Court on Tuesday set up a commission of inquiry comprising a former HC judge to probe the issue of water contamination in city's Bhagirathpura, saying the matter requires probe by an independent, credible authority and "urgent judicial scrutiny".
It also directed the commission to submit an interim report after four weeks from the date of commencement of proceedings.
A division bench of Justices Vijay Kumar Shukla and Alok Awasthi constituted the commission while hearing several public interest litigations (PILs) filed simultaneously regarding the deaths of several people in Bhagirathpura due to the consumption of contaminated water.
The HC reserved the order after hearing all the parties during the day, and released it late at night.
The state government on Tuesday told the HC that the deaths of 16 people in Indore's Bhagirathpura area was possibly linked to a month-long outbreak of vomiting and diarrhoea caused by contaminated drinking water.
The government presented an audit report of 23 deaths from the current gastroenteritis epidemic in Bhagirathpura before the bench, suggesting that 16 of these fatalities may have been linked to the outbreak of vomiting and diarrhoea caused by contaminated drinking water.
The report, prepared by a committee of five experts from the city's Government Mahatma Gandhi Memorial Medical College, stated that the deaths of four people in Bhagirathpura were unrelated to the outbreak, while no conclusion could be reached regarding the cause of death of three other people in the area.
During the hearing, the high court sought to know from the state government the scientific basis behind its report.
The division bench also expressed surprise at the state government's use of the term "verbal autopsy" in relation to the report, sarcastically stating that it had heard the term for the first time.
The HC expressed concern over the Bhagirathpura case, stating that the situation was "alarming," and noted that cases of people falling ill due to contaminated drinking water have also been reported in Mhow, near Indore.
In its order, the HC said the serious issue concerning contamination of the drinking water supply in Bhagirathpura area allegedly resulted in widespread health hazards to residents, including children and elderly persons.
According to the petitioners and media reports, death toll is about 30 till today, but the report depicts only 16 without any basis or record, it said.
It is averred that sewage mixing, leakage in the pipeline, and failure of civic authorities to maintain potable water standards have led to the outbreak of water-borne diseases. Photographs, medical reports, and complaints submitted to the authorities prima facie indicate a matter requiring urgent judicial scrutiny, the HC said.
"Considering the gravity of the allegation and affecting the right to life under Article 21 of the Constitution of India and the need for an independent fact-finding exercise, the Court is of the opinion that the matter requires investigation by an independent, credible authority," it said.
"Accordingly, we appoint Justice Sushil Kumar Gupta, former judge of the Madhya Pradesh High Court, a one-man commission of inquiry into the issues relating to water contamination in Bhagirathpura, Indore, and its impact on other areas of the city," the HC added.
As per the order, the commission shall inquire into and submit a report on the cause of contamination -- whether the drinking water supplied to Bhagirathpura was contaminated; and the source and nature of contamination (sewage ingress, industrial discharge, pipeline damage etc).
The panel will also probe the number of actual deaths of affected residents on account of contaminated water; find out the nature of disease reported and adequacy of medical response and preventive measures; suggest immediate steps required to ensure safe drinking water as well as long-term infrastructural and monitoring reforms.
It will also identify and fix responsibility upon the officers and officials found prima facie responsible for the Bhagirathpura water contamination incident, and suggest guidelines for compensation to affected residents, particularly vulnerable sections.
The commission shall have powers of a civil court for the purpose of summoning officials and witnesses; calling up records from the government department, hospitals, laboratories and civic bodies; ordering water quality testing through accredited laboratories; conducting spot inspections.
All state authorities involving district administration, Indore Municipal Corporation, public health engineering department and Madhya Pradesh Pollution Control Board shall extend full co-operation and provide records as sought by the commission, it said.
The state government shall provide office space, staff, and logistical support to the commission, it said.
During the hearing in the day, the state government also presented a status report to the court in this matter.
According to reports, a total of 454 patients were admitted to local hospitals during the vomiting and diarrhea outbreak, of whom 441 have been discharged after treatment, and 11 are currently hospitalised.
According to officials, due to a leak in the municipal drinking water pipeline in Bhagirathpura, sewage from a toilet was also mixed in the water.
