After a flap over his comment that the government has not faced such a liquidity situation in 70 years, NITI Aayog Vice Chairman Rajiv Kumar tweeted today that the government "has been taking bold steps" to accelerate the economy and "there is no need to panic or spread panic".

Rajiv Kumar's clarification came just after Congress leader Rahul Gandhi's tweet that the government's "own economic advisors have finally acknowledged what we cautioned for long - India's economy is in a deep mess".

Mr Kumar tweeted: "I would request the media to stop misinterpreting my statement.

I would request the media to stop misinterpreting my statement. The government has been taking bold steps to accelerate our economy & will continue to do so. There is no need to panic or spread panic. — Rajiv Kumar ???????? (@RajivKumar1) August 23, 2019

The comments come at a time the country's economy is facing the worst pace of growth in nearly five years.

"Now, accept our solution and remonetise the economy, by putting money back in the hands of the needy and not the greedy," Mr Gandhi said.

Speaking on the liquidity situation, Mr Kumar was reported as saying by ANI: "Nobody is trusting anybody else. It's not just the government and the private sector, within the private sector, nobody wants to lend to anybody else."

"There are two issues. One, you may have to take steps which are out of the ordinary... Secondly, I think the government must do whatever it can to take away some of the apprehensions for the private sector," he said.

#WATCH: Rajiv Kumar,VC Niti Aayog says,"If Govt recognizes problem is in the financial sector... this is unprecedented situation for Govt from last 70 yrs have not faced this sort of liquidity situation where entire financial sector is in churn &nobody is trusting anybody else." pic.twitter.com/Ih38NGkYno ANI (@ANI) August 23, 2019

India's GDP or gross domestic product grew 5.8 per cent in the January-March period. For the financial year ended March 31, the economic growth stood at 6.8 per cent.

In the first quarter of the current financial year (2019-20), GDP growth is likely to slow down further to 5.7 per cent, due to low consumption, weak investments and an under-performing service sector, according to a report by Japanese brokerage Nomura.

Nomura however added that the economy is expected to see some recovery in the July-September quarter.

Finance Minister Nirmala Sitharaman is due to hold a press briefing this evening, amid expectations that the government would announce steps to revive economic growth.

The equity markets staged a recovery after three consecutive days of losses, with the Sensex rising 0.6 per cent and the broader Nifty benchmark ending 0.8 per cent higher.

Analysts say hopes of investor-friendly measures from Finance Ministry to revive the economy aided the recovery.

Meanwhile, the government's Chief Economic Advisor Krishnamurthy Subramanian has said that government intervention in the private sector creates a moral hazard.

India has been a market economy since 1991, when it opened up to foreign competition, he said on Thursday. Sectors in market economies run through the spectrum of a sunrise-to-sunset phase, after which many businesses tend to fade away, Mr Krishnamurthy said.