New Delhi, May 5 : Nobel laureate Prof Abhijit Banerjee, on Tuesday, said India needs a bigger stimulus package to overcome the economic crisis caused by the spread of Coronavirus.
In a video interaction with the former Congress president Rahul Gandhi, Prof Banerjee said the country should give money to the poorest of the poor, “so that they can buy in stores or they buy consumer goods." Mr Gandhi opined that a lot of people earn their bread from small and medium businesses, who are going to have cash flow problems and added, “and a lot of those businesses are going to go bankrupt because of the shock.” At this, Prof Banerjee stated, “That is why a lot of us have been saying we need a stimulus package. That’s what the US, Japan, Europe are doing.
We haven’t decided on a large enough stimulus package. We are still talking about 1 percent of GDP. USA has gone for 10 percent of GDP.” The noted economist also said that India should give money to state governments to try out their own schemes and reach people who are excluded using NGOS. “Some money will be stolen. But if we say that we don’t want to do anything that could go possibly wrong, then we will make sure it goes wrong”, he said. “The last piece of this is to get cash to people who really need some machinery.
We can’t really get cash to the people. People who have Jan Dhan accounts can get money but many people don’t, especially migrants may not have access”, Prof Banerjee added. Responding to a question by Mr Gandhi that what else Prof Banerjee thinks on the steps taken by the government, the latter said that migrant movement questions cannot be handled by the state government. “I feel that's a place where we should have tested people before they are allowed to board a train, something only a federal government can do”, he said.
Talking to Prof Banerjee, Mr Gandhi asked, “How do you see these things playing, once the disease washes out, six months from now, from the poverty aspect? There is going to be economic backlash, bankruptcies. How do we think of it in the medium term as opposed to the immediate short term?” Responding to him, the Nobel Laureate said that the question of demand shortfall. “There are two concerns- 1. How to avoid a chain of bankruptcies? Maybe writing off a lot of debt is the way to go, as you had mentioned.
The other is demand shortfall, and getting some cash into the hands of the population is the best way to kick start the economy. The USA is very aggressively doing that. This is a Republican administration run by a bunch of financiers. If they are willing to do it, we should be willing to do it. This is not run by a bunch of socially minded liberals, but by people who used to work in the financial sector. But they have decided that just for economic survival we need to pump money into people’s hands. I think we should take a cue from that”, he added. This was Mr Gandhi’s second such talk with an economist over the crisis of Indian economy, as he had interacted with former Reserve Bank Governor Raghuram Rajan last week. [UNI]