India's economic growth slowed to 4.5 percent in the second quarter and Moody’s has lowered its FY20 GDP growth projection for India from 5.8 percent to 4.9 percent. Moreover, former chief economic adviser Arvind Subramanian has said that the country is in a great slowdown and the economy is headed to an intensive care unit.

Subramanian has recommended a slew of remedial measures including the creation of two bad banks. Talking to CNBC-TV18, Senior Economist at I-Sec PD Abhishek Upadhyay and Chairman of EGROW Arvind Virmani expressed their views on the subject.

Talking about the remedial measures suggested by the former CEA, Virmani said, “I am not an expert on financial engineering, but from a macro perspective there are different things one can do and each may be appropriate for a different part of the problem. So one, of course, is the bad bank which may be appropriate for bad industrial loans of the public sector banks.”

"I have been in government for several decades and we never had good data. If everything is going to be held up for good data, I am afraid we won’t solve anything. We do not have good data but that does not mean you just sit and wait for the data to come." he added.

According to Abhishek Upadhyay, the market assumption clearly is that the true fiscal deficit is way higher than the government has been printing for the last 3-4 years. “Clearly extra borrowing is one area in which the market is significantly worried about. One of the possible approaches is the bad bank. I am not sure that even this active approach can crystallise quickly. There are issues about asset valuations, there are issues about how the ownership structure of this bad bank,” he observed.

First Published:Dec 16, 2019 6:52 PM IST