The factors that are slowing growth are piling up. Lower rates are important, but they are only part of the solution. The Reserve Bank of India’s (RBI) agenda for its next policy meeting on 7 August should make for interesting reading. Simply put, the liquidity problems in India’s non-banking financial companies (NBFCs) are not going away any time soon, and gross domestic product (GDP) growth is slowing due to a long list of domestic and international challenges. So, what should the central bank do—where can policymakers look to revive economic growth?

Let’s start with credit. Following the fallout of the liquidity problems at NBFCs, all eyes have turned to bank credit. Bank credit rose quickly in early 2019, helping to offset some of the NBFC-led drag on growth. But that has changed. Credit growth began to slow in March and the slowdown is across sectors, seemingly led by both demand and supply issues.

This leads us to the next issue—can economic growth be revived without an expansion in credit? “Credit-less" recoveries are generally considered rare around the world given that it’s hard to fund growth without the support of the funders-in-chief —a nation’s banks. However, there is evidence to show that credit-less recoveries are possible and, in fact, more common than perceived. An International Monetary Fund (IMF) paper analysing 223 recovery episodes found that one out of five recoveries are credit-less. And they have some special characteristics. For example, much of the onus falls on the shoulders of the consumption sector, which is not as dependent on leverage.

So, can consumption lift India out of its growth malaise? Probably not. Consumption is facing its own headwinds. Wage growth has been the traditional driver of consumption, but increases in salaries and overall employment conditions seem weak across both urban and rural India.

In rural India, both agricultural and non-agricultural (primarily construction) wages have been falling and unemployment is on the rise. This is likely to be further exacerbated by delayed monsoon rains. In urban areas, some surveys suggest that labour market conditions have been soft for the last three years. This had been partly camouflaged by enhanced access to consumer credit. Not anymore though, with the fallout in the NBFC sector at the end of last year.

Overall, the factors driving the slowdown in GDP growth are piling up—weak rural wages exacerbated further by erratic rains, a weak urban labour market and the softening in personal loans. All this set against a backdrop of weakening global growth.

Still, the news is not all bad. Inflation is well under the 4% target and is likely to remain so for the foreseeable future. Interestingly, our diffusion index, measuring the spread of disinflation, suggests that it is quite widespread across sub-components. Some worry that poor rains will stoke food prices. But our analysis suggests that monsoon-led supply disruption will be offset by weak demand.

This brings us to interest rates. RBI has already cut the repo rate by 75 basis points (bps). We think there is space for 75bps of additional rate cuts, spread over August—fourth quarter of 2019 and first quarter of 2020. This will take the policy repo rate to 5% by March 2020. We also expect RBI to maintain liquidity at a surplus, where it has been since early June. While transmission has been patchy so far, it could pick up by fourth quarter of 2019 given the potent combination of rate easing and surplus liquidity, and the fact that transmission tends to take 3-4 quarters in India.

However, we think rate cuts alone are not enough. They represent just one part of the revival strategy. The current slowdown is not just cyclical and has some structural overtones, which need lasting solutions. In addition to rate cuts, we believe two other steps will be necessary for a surer revival in growth.

The first is recycling public sector assets so that investment picks up in a fiscally responsible way. This is not just limited to shedding the government’s stake in companies. It also entails selling completed public sector infrastructure projects such as roads, ports and airports, and using the proceeds to build new roads, ports and airports. The second is shedding the foreign trade protectionist stance. Tackling domestic bottlenecks instead of levying import duties could help India gain export market share. To be fair to RBI, this will require a concerted effort by the whole government.

Pranjul Bhandari is chief India economist at HSBC Holdings Pl