I tried the solution that @idiot mentioned, using git submodules. Worked like a charm. The link that @idiot mentioned was useful - in particular look at the section “Working With A 3rd Party Dependency”.
You should also refer to GitHub - ReactiveX/RxSwift: Reactive Programming in Swift where there are instructions for manually installing using git submodules. It is a simple process.
Note: The error goes away only after you build the project containing the playground.