Following the lead of industrialists, leading bankers in the country have begun to admit that India’s economy faces a slowdown and urgently needs fixing.

Chairman Rajnish Kumar of India’s largest state-owned bank, State Bank of India, said that there is a slowdown in demand and it is visible in every sector. He feels the major spending thrust should come from the government. “Once that starts reflecting on the ground, I am hopeful that private sector investments will follow,” Economic Times quotes him as saying.

He said the government should increase funding for the infrastructure sector and provide tax sops to promote affordable housing, which will help the construction sector. “I am hoping that as the festive season starts, there should be a pickup in demand in the auto sector,” he added. India has a string of festivals from September onward including Dusshera and Diwali.

Earlier Deepak Parekh, chairman of the country’s leading mortgage lender, Housing Development Finance Corporation, said there has been an across-the-board slowdown in consumption but he felt it is temporary and will improve before the festival season.

He also highlighted the tight liquidity scenario pertaining to non-banking financial companies and housing finance companies and said he wanted banks to shed their risk averseness. He pointed out that banks were lending only to those shadow bankers and housing finance companies that enjoy high credit ratings.

His prescription was opposed by Rajnish Kumar, who felt that stricter lending norms were crucial to prevent defaults and maintain the fiscal health of the banks.

“In these times, it can’t be business as usual,” he said. “We have seen the consequences. In each sector, we have reviewed our policies and if clients conform to those policies bank credit will be available to them. Obviously, there will be a tightening around the monitoring of funds, which has become a big issue,” he added.

In some recent cases of loan defaults, the roles played by banks have come under the scrutiny of investigating agencies, and hence lenders have become more cautious while disbursing loans.

Corporate India has been urging the government to undertake a stimulus program, providing help from the monetary authorities in the form of lower interest costs to overcome the slowdown.

One of the worst-hit sectors is automobiles, now facing a record slump in sales. Some automobile companies are cutting output and others are slashing costs.

Leading industrialists including Rahul Bajaj and Adi Godrej have expressed concern over the economic slowdown and called upon the government to take corrective steps.

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Earlier this year, India grew at its slowest pace in five years at 5.8% during the January-March quarter. Growth during the 018-19 fiscal year declined to 6.8% from 7.2% a year earlier. The country also lost the fastest-growing-economy tag to China.