The government has executed several structural reforms such as goods and services tax and Insolvency and Bankruptcy Code, which are good for the economy, but they have impeded monetary velocity that needed to be compensated for, said Rahul Bhasin, managing partner at Baring Private Equity in an interview to CNBC-TV18.

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"It wasn’t done and as a consequence broad money has been declining and there is a sharp liquidity issue in the whole system,” he added. Money supply to gross domestic product (GDP) ratio has been falling structurally for the last 3-4 years, said Bhasin.

Talking about monetary policy, he said that the RBI is stuck to its old models even though things have changed quite a bit. “I have been asking for 200 bps rate cuts for a while; need to ‘overdo’ it on rates,” added Bhasin.

Talking further about the slowdown, Bhasin said, “We are still a poor economy, our consumption base is still quite low. Only 18-20 percent of the population is at a reasonable level of consumption.”

“However, from an immediate perspective my concern of the slowdown getting entrenched. I do not think the bureaucracy, the regulators, the policymakers understand how deeply the whole system has been affected and how radically they need to take action and how quickly,” he added

According to him, a quick and correct policy intervention can change things quickly.