Chief Economic Advisor Krishnamoorthy Subramaniam on Thursday, speaking at a conference in New Delhi, said “I think we expect the government to use taxpayers money to intervene every time there is a sunset phase," . This statement by him can obstruct the stimulus expected to the slowdown of cash strapped Indian businesses. Speaking against many aspects of the budget and financial policies, he said that government intervention in the private sector creates a moral hazard.
Subramanian discussed. “You introduce possible moral hazard from too-big-to-fail and possibility of a situation where profits are private and losses are socialized, which is basically an anathema to the way the market economy functions."
According to Livemint, Subramaniam said that the sectors in market economies run through the spectrum of a sunrise-to-sunset phase, after which many businesses tend to fade away. Sectors like the automobile sector have been calling for fiscal boost from the government for past few weeks as the Finance Minister Niramala Sitharaman’s budget failed to provide any support to the sector in either investment or consumption in the sector.
This has caused a major slump in the economy, growth rate reaching a five-year low of 5.8% between January to March period.
In recent times, expenditure on hair oil to biscuits have declined as buyers fret over their jobs amid a bigger worldwide slump. A shadow-banking crisis has affected private consumption very adversely which makes up nearly 60% of GDP. With the interest rates being slashed by the central bank and the forecast for GDP growth being lowered from 7% to 6.9%, latest signs show very little hopes of recovery.