The Economics Nobel laureate Abhijit Banerjee feels that in order to revive its coronavirus-hit economy, India needs a stimulus package much bigger than the $23 billion one announced in March.
He urged the Indian government to take a clue from the US, where the Donald Trump administration has announced a stimulus package equivalent to around 10% of the country’s GDP.
“India hasn’t discussed a large enough package. We are still talking about 1% of GDP,” Banerjee told Congress parliamentarian Rahul Gandhi during a 27-minute video interaction today (May 5). “The US is 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.”
From direct cash transfers to waiving off debt for three months, Banerjee proposed many solutions to avert bankruptcies and prevent a fall in consumer demand in the Indian economy.
While he praised the Indian central bank’s decision to impose a three-month moratorium on repayment of loans from March 1, Banerjee felt more can be done. “We could even say that the debt payments for this quarter will be canceled and will be taken care of by the government,” said Banerjee.
He also stressed on the need to put cash into the hands of the poor, especially those who are excluded from the ambit of various welfare schemes. “You want to do more than that to get cash to people,” said Banerjee. “For that, it is clear that there should be some funds available to local authorities who can identify those people and serve them,” said Banerjee.
In a similar interaction with Gandhi on April 30, former central bank governor Raghuram Rajan had also batted for decentralization of power. “If anyone wanted to believe in the strongman theory, this is the time to disabuse themselves,” said Banerjee.
Banerjee’s comments came a day after India’s manufacturing activity contracted to a record low in April, based on the purchasing managers’ index (PMI) released by IHS Markit.