Nobel laureate Abhijit Banerjee on Friday said India has not done “anything close to enough” to provide relief to the poor, who have been adversely impacted by the countrywide lockdown to contain the spread of the coronavirus. In an interview to BBC, Banerjee said the Indian government needs to think of a “clear, well-articulated plan” on what should be done next.
Banerjee said that while the “government was right in its thinking to throw a shock in the system” to tackle the crisis, it needs to be more generous in providing relief to people. “This disease is going to be with us for a long time until a vaccine arrives, which is not anytime soon,” he added.
India’s economic growth has already been going through a downward slump. Following this, the coronavirus outbreak has triggered loss of livelihoods that has resulted in an additional demand slump now, Banerjee said.
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“I know there’s a concern that what is the use of giving money to people when the markets are closed,” Banerjee explained. “But, to begin with, you can tell people that money is coming and create a mood for demand. People need reassurance. And the government has to be proactive in reassuring people.”
Banerjee added that the Indian administration should be more liberal about spending to bail out those facing poverty due to loss of income. “Hundreds of millions of households who are already listed as recipients for India’s many welfare schemes would be eligible for such direct cash benefits,” he said. “For the large number of people who are not beneficiaries of such schemes, there could be local community reporting mechanisms to identify them and make sure the money reaches their pockets.”
The Nobel laureate admitted that there will be inaccuracies involved in identifying those who deserve the benefit. “But we are not trying to be perfect at this point in time. This is an emergency,” he added. Banerjee also said that India, like the United States, should print money to fuel the expansion of welfare benefits.
“Possibly there is the fear of inflation, when there is not much supply of goods and services,” Banerjee added. “But India has to do something about [bridging] the income gap that has been created. The government has to be more aggressive about spending money.”
Indian economy
India’s economic growth slipped to a nearly seven-year low of 4.7% in the October-December, according to government data. To combat the crisis triggered by the pandemic, Finance Minister Nirmala Sitharaman had last month announced a Rs 1.70 lakh crore relief package that will provide direct cash transfers and ensure food security for certain sections of the society. The central bank, for its part, had cut interest rates by 75 basis points to 4.4%, in an emergency meeting on March 27 and has taken steps to shore up liquidity, in line with most major central banks around the world.
Last month, Reserve Bank of India Governor Shaktikanta Das had said the central bank will not shy away from using “any instrument” necessary to revive growth and preserve financial stability to mitigate the adverse economic impact of the coronavirus pandemic.
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