Entire financial system under threat for first time in 70 years: Niti Ayog
New Delhi : India is dealing with an unprecedented economic slow-down these days and government's think tank Niti Ayog is prepping up extraordinary steps to cure it.
Niti Ayog vice chairman Rajiv Kumar said that they will have to look out for steps which encourages private sector players to not hesitate in investing money.
He also said private investments will drive India out of the middle income trap.
Tagging the current economic situation at unprecedented, he claimed that this for the first time in last 70 years when entire financial system is in crisis.
"Nobody is trusting anybody else... within the private sector nobody is ready to lend, everyone is sitting on cash...you may have to take steps which are extraordinary," he said at an event. Elaborating further, Kumar said some of the steps have already been announced in the Union Budget to address stress in the financial sector and give a push to economic growth which hit a 5-year low of 6.8 per cent in 2018-19.
Talking more about the factors which led to such situation he said the prime reason stays with NPAs in the banks. With more NPAs reduced the ability of banks to do fresh lending, he said, adding the space was occupied by the shadow banks with credit growth of 25 per cent.
The non-banking finance companies (NBFCs) could not manage this high loan growth leading to defaults by some of the large entities triggering slowdown in the economy eventually.
“The whole nature of the game has changed after demonetisation, the Goods and Services Tax and the Insolvency and Bankruptcy Code. The earlier period where you had 35 per cent cash sloshing around, it has become much less now. All of these put together it is a fairly complex situation. There is no easy answer,” he said.
Rajiv Shukla also mentioned about the government holding back payments for services availed from the private sector as another big reason behind economic slow down.
“I have no hesitation in saying that there is no business of the government to hold back payments which are due to the private sector. At the moment, there is huge effort going on to try and get this sorted out,” he said.