Former Reserve Bank of India governor Raghu Rajan has expressed his concerns over what he calls India's alarming -23.9 per cent quarterly GDP and claimed that the data is only going to worsen once the impact of the pandemic on the informal sector is accounted for.

The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation on August 31 released the estimates of Gross Domestic Product (GDP) for the April-June period. As per the readings revealed by the government of India, GDP at Constant (2011-12) Prices in Q1 of 2020-21 is estimated at ` 26.90 lakh crore, as against ` 35.35 lakh crore in Q1 of 2019-20. It showed a contraction of 23.9 per cent as compared to 5.2 per cent growth in Q1 2019-20.

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Reacting to the lately released estimates of GDP for the April-June period, Raghuram Rajan in a long post on his LinkedIn page alerted the government and its bureaucrats to be frightened out of their complacency and pitched for a stimulus to prevent an "atrophied" economy.

Here's are the key takeaways from Raghuram Rajan's note on India's GDP:

India's GDP Contraction In Comparison With Other Most COVID-Affected Countries:

Rajan in his post said that the recently released quarterly GDP growth number for the first quarter of FY2020-21 should alarm us all. The 23.9 percent contraction in India compares with a drop of 12.4 per cent in Italy and 9.5 per cent in the United States, two of the most Covid-affected advanced countries. Rajan alleged that the number will probably be worse when we get the estimates of the damage in the informal sector.

Borrow More Without Scaring Bond Markets:

Rajan suggested that India could consider borrowing more without scaring the bond markets, however, it needs to be committed to return to fiscal viability over the medium term . "For example, by setting future debt reduction targets through legislation, and committing to honest and transparent fiscal numbers with a watchdog independent fiscal council," he said.

Public Sector Firm Shares

In addition to borrowing, Raghuram Rajan recommended that India should prepare public sector firm shares for on-tap sales. He said that this could lead to the advantage of every period of market buoyancy.

The current period of buoyancy already looks like a missed opportunity. Many government and public sector entities have surplus landholding in prime urban areas that can be prepared for sale. Rajan said that amid the pandemic if the sales do not take immediately, then at least the preparation for the same as well as the announced time table will lend confidence to the bond market.

Private Sector Could Lend Helping Hand

Furthermore, Rajan believed that the private sector should be urged to give a helping hand. Cash-rich platforms like Amazon, Reliance, and Walmart could help smaller suppliers get back on their feet, even funding some of them. He said that all large firms should be incentivized to clear their receivables quickly.