TIL Desk/Business/New Delhi/ Citing reasons for the “severe illness in the economy”, former Chief Economic Advisor Arvind Subramanian has pointed out that India is now facing a “Four Balance Sheet” challenge — comprising banks, infrastructure, plus NBFCs and real estate companies — and is trapped in an adverse interest growth dynamic.
In a Harvard University Working Paper ”India”s Great Slowdown: What Happened? What”s the Way Out?” the authors Subramanian and Josh Felman have said that India is facing an adverse interest growth dynamic, in which risk aversion is leading to high interest rates, depressing growth, and generating more risk aversion.
On the FBS (Four Balance Sheet) challenge, the paper said that examining the pattern of growth in the 2010s, standard explanations cannot account for the long slowdown, followed by a sharp collapse. “Our explanation stresses both structural and cyclical factors, with finance as the distinctive, common element,” it said.
