The government needs to take steps which eliminate apprehension from the minds of private sector players and encourage them to step up investments, Niti Aayog vice-chairman Rajiv Kumar said.
He also said private investments will drive India out of the middle-income trap.
Terming the stress in the financial sector as unprecedented, he said nobody had faced this sort of situation in the last 70 years where the entire financial system was under threat.
“Nobody is trusting anybody else... within the private sector nobody is ready to lend, everyone is sitting on cash...you may have to take steps which are extraordinary,” he said at an event here.
Elaborating further, Kumar said some of the steps have already been announced in the Union Budget to address stress in the financial sector and give a push to economic growth which hit a 5-year low of 6.8 per cent in 2018-19.
Explaining how stress in the financial sector has led to a slowdown in the economy, the Niti Aayog vice-chairman said the entire episode started with indiscriminate lending during 2009-14 leading rise in non-performing assets (NPAs) post-2014.