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Wednesday, January 22, 2020

Construction, property industries in trouble, Raghuram Rajan says

There is also “significant distress in rural areas,” Rajan wrote in an opinion piece in India Today magazine. He said India is in a growth recession, defined as an economy growing at a slow pace and where unemployment is rising.

By: Bloomberg | Published: December 7, 2019 5:08:32 pm
Raghuram Rajan, Raghuram Rajan on GDP, GDP growth, India's GDP, GDP growth India, economic crisis, economic slowdown, Business news, Indian Express Raghuram Rajan wrote in an opinion piece in India Today magazine. (Express File Photo)

The real estate, construction and infrastructure industries are in “deep trouble,” and non-bank finance companies which lend to these sectors should have their asset quality reviewed, former central bank Governor Raghuram Rajan said.

There is also “significant distress in rural areas,” Rajan wrote in an opinion piece in India Today magazine. He said India is in a growth recession, defined as an economy growing at a slow pace and where unemployment is rising.

India’s GDP growth slowed to 4.5% in the quarter ended September, a six-year low. A crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy.

The Reserve Bank of India should carry out an asset quality review of the non-bank finance companies, Rajan said. The central bank closely monitors the top fifty non-bank financiers, which account for about 75% of total assets in the shadow banking sector, Governor Shaktikanta Das said in a press conference on Thursday.

“We have a fairly good idea of where the vulnerabilities lie,” said Das, reiterating that the central bank won’t allow any large or systematically important non-bank lender to collapse.

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