Chief Economic Advisor Arvind Subramanian said the government was looking to address the issue of bad loans and hinted that strong action will be taken to arrest the situation.

He was speaking at the sidelines of a lecture at the Indian Institute of Management, Ahmedabad.

“It has been recognised that one of the major challenges of the macro economy is what we call the twin balance sheet problem. Many firms have unsustainable debt and that in turn affects the banks and hence both the balance sheets have debts.

“It is having an effect on the economy in terms of reducing private investment and growth and so the government is now going to see how to improve this problem and there are many ideas being given," he said.

Speaking on the topic of ‘The surprise that is the Indian Economy’, Subramanian highlighted the need of more migration in the country as some States were found to be ageing faster than the others.

“While India’s demographic dividend had a gentler rise and fall on a national level, within the country, there were some States ageing faster than the others. We may need more migration in India. The demographic dividend in India will peak at 2020 and then start declining and we need to act fast,” he stated.

He avoided making any comments on the Centre’s demonetisation move, but stated that the focus should now be on arresting the flow of black money.

“There is a stock and flow of black money. Now, the stock demonetization is done, we should now focus on flow of black money and it is going to need sticks and carrots method,” Subramanian said.