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Need to raise govt capital expenditure to help propel demand, says former RBI governor Rangarajan

Updated : August 14, 2019 07:38 PM IST

Former Reserve Bank Governor, C Rangarajan spoke to CNBC-TV18 about the ongoing economic slowdown and what is needed to be done to raise the domestic rate of growth.

"Ffor addressing the slowdown we have two sets of problems. One is what needs to be done in the current year and next year in order to accelerate or in order to raise the growth rate. Two, is a largely issues, namely of how to sustain a higher rate of growth in the economy, so that we can in the next 5-6 years reach a figure of USD 5 trillion economy.”

"The most urgent thing that is required is to see what is needed to raise the rate of growth in current and next year," Rangarajan said.

According to him, "We are facing a very peculiar phenomenon in the current situation and that is simultaneously we are having a fall in the investment rate and at the same time, we have a general weakening of the effective demand. Normally, you have a situation in which you face only one of these two things."

“So, the decline in investment rate is structural because it is not a decline just this year but it has been declining steadily. On the other hand, there is this weakening of effective demand which is cyclical,” said Rangarajan adding that we need address both these problems that is weakening of effective demand as well as declining investment rate, if the economy needs to move forward.
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