Banking Sector Under Stress: Ex-Finance Secy Subhash Chandra Garg

As the economy faces its worst slump, former Finance Secretary Subhash Chandra Garg discusses the key indicators.

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According to recent reports, India’s economy will contract by 12.6 percent in Q2. While the economy faces its worst slump in decades, former Finance Secretary Subhash Chandra Garg discusses the key macro indicators.

Garg predicts that the second quarter will see a decline of 12-15 percent while the third quarter will see a decline of 5-7 percent, and that we can only expect normalisation by the fourth.

“The growth momentum that India needed has drastically suffered.”
Subhash Chandra Garg, Ex-Finance Secretary

Garg praised that government’s decision to “support the weak to keep body and soul together”, but he also noted that the government must provide more to the labour industry if it wants to revive the economy. But more importantly, “MSMEs need to be given assistance”.

Government will have to increase borrowings. 
Subhash Chandra Garg, Ex-finance secretary

Garg further said that 80-85% of our economy is self-sufficient and do not need any kind of assistance. But it is the remaining 15-20% who could really use the help. He said, “Not giving stimulus to the 15-20% will contribute to the contraction. They should be given assistance now.”

But India is reluctant in giving a stimulus package.
Subhash Chandra Garg, Ex-finance secretary

On the situation of the banking sector, Garg remarked that if 72% of the loans are stressed then almost the entirety of the banking sector comes under stress. This also means that “credit is virtually stalled.”

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