New Delhi: India should come out with a large enough stimulus package to revive demand, Nobel laureate Abhijit Banerjee said Tuesday. He favoured putting cash in the hands of the bottom 60 per cent population to help boost the economy post-lockdown.
Measures suggested
Abhijit Banerjee, while talking to Congress leader Rahul Gandhi through video conferencing from the United States, suggested several measures. He was in favour of increasing people’s spending by giving money to help revive demand. He also said temporary ration cards should be issued for providing grains to the poor. He suggested cancelling the debt for this quarter.
Banerjee was deliberating on the economic impact of the COVID-19 pandemic with Rahul. It was as part of a series of dialogues broadcast on Congress’ social media handles.
Disastrous decisions
The Nobel Laureate debunked the theory that only a ‘strongman’ could take the ‘right decision’ during a crisis. He said it has proved ‘disastrous’ in the US and Brazil.
“The US and Brazil are two countries that are messing up right and left. These are two ‘strongmen’ behaving like… pretending like they understand anything. But what they say every day is kind of laughable. If anyone wanted to believe in the strongman theory, this is the time to disabuse themselves,” asserted Banerjee.
Banerjee said that the real concern is if the economy will revive. “I think we should try to be optimistic about the survival of the overall economic well-being of the country. Just take the right actions,” Banerjee said.
Coming out of lockdown
Banerjee was asked whether India should soon come out of the lockdown. He said it depends on the disease. “You do not want to take down the lockdown when a lot of people are getting sick,” opined Banerjee. “We have to kind of be aware of the time path of the disease,” he added.
Rahul suggested suggested that states should be given options. They should be allowed to decide themselves on the lockdown, to which Banerjee agreed.
Large stimulus package required
The Economics Nobel Prize winner said it was important for India to announce a large enough stimulus package. It is necessary to deal with the present crisis. This is exactly what the United States, Japan and Europe are doing.
“A lot of us have been saying that we need a stimulus package. That is what the US is doing, Japan is doing, Europe is doing. We really have not decided on a large enough stimulus package. We are still talking about one per cent of GDP. The United States has gone for 10 per cent of GDP,” Banerjee informed.
Banerjee said that though India put a moratorium on debt payments, but ‘we could do more than that. We could even say that the debt payments for this quarter will be cancelled. That will be taken care of by the government’.
Short-term economic concerns
He was asked about the short-term concerns for the economy. The economist said the question is of demand shortfall and bankruptcies.
“There are two concerns – how to avoid a chain of bankruptcies. Maybe writing off a lot of debt is the way to go. The other is demand shortfall, and getting some cash into the hands of the population is the best way to kick start the economy,” Banerjee informed. He pointed out that the US is aggressively doing so by pumping in money into people’s hands for economic survival.
PTI