Current economic slowdown 'unprecedented', says Niti Aayog's Rajiv Kumar

Niti Aayog Vice-Chairman Rajiv Kumar has said the ongoing financial crisis in India is  "unprecedented". He said the government must take steps to handle the ongoing economic slowdown. He said the entire economic situation had changed after implementation of initiatives like demonetisation, Goods and Service Tax and Insolvency and Bankruptcy Code.

He said India was facing such an economic downturn for the first time in 70 years, a liquidity crisis wherein lenders had stopped funding businesses, resulting in a situation where they had to survive on cash.

"This is an unprecedented situation for the government of India. In the last 70 years nobody had faced this sort of situation where the entire financial system is under threat and nobody is trusting anybody else. Within the private sector nobody is ready to lend, everyone is sitting on cash," said Kumar, addressing the Hero Mindmine summit on Thursday.

He said the government would need to take extraordinary steps to come out of the crisis. "It takes a lot of courage to break the inertia...I think the government must do whatever it can to take away some of the apprehension of the private sector," he added, reported IANS.

He said initiatives such as demonetisation, GST and IBC had changed the rules of the game and that the current liquidity crisis had led to a complex situation. "The earlier period where you had 35 per cent cash sloshing around has become much less now. All of these put together is a fairly complex situation. There is no easy answer," he added.

He also asked the government not to hold back due payments to the private sector. Talking about the NBFC crisis in India, he said the government had prevented many of the shadow banks from collapsing and that it was doing everything possible to get out of the crisis. He said the Centre would need to "eliminate apprehension from the minds of private sector players" to boost investments. "This is an unprecedented situation and we are still grappling to find the right modality to get a fix," he said.

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Edited by Manoj Sharma