The government has announced a Rs 1.7 lakh crore program that includes a transfer of Rs 500 to every woman Jan-Dhan account holder, extra grain and free gas cylinders, among other things to tackle the coronavirus pandemic.
In an interview with CNBC-TV18, Nobel Laureate Abhijit Banerjee shared his opinion on the government's initiatives and outlined what needs to be done in an unprecedented and unexpected crisis like this.
“It is a package that assumes that the crisis will be over in a couple of weeks. Even for very poor Indians Rs 500 isn’t anything. If the crisis lasts two weeks then that is fine. Some of the media coverage suggests that it is only gathering strength and therefore if there will be much longer and bigger shutdown, then a bigger number will be needed,” he said.
On his take on the government's handling of the issue of migrants, he added, “It is hard to double-guess whether the administrative preparations could have been better. The one thing that the government could have done better is just sending less mixed signals. This idea that shops will be open but no one can go out, the police got confused and there were reports of police shutting down shops by force. There was a lack of clarity in some of the announcements and that could have been avoided."
"If they had anticipated how the migrants would react, they could have made announcements that we will take care of you, we are building shelters, we are going to provide transportation – those solutions were needed to be preannounced at a scale that was credible,” he said.
“Lockdown itself is probably the step that most governments have been adopting given that we didn’t start testing, we didn’t import test, we didn’t develop testing earlier. We didn’t somehow take it seriously enough before. So at that point, yes, maybe that is the only thing you could have done," he said adding that we need to be sensitive to what is going to be extremely difficult to enforce.
“Quantitative easing (QE) is the name of the game everywhere, why should we be special. We have been in a fairly flat economy already and now we are getting hit with this. I have been in favour of being expansionary in the last six months or a year and now I feel even more strongly that we should be expansionary. There is no reason to be tight-fisted. This is the time to boost demand as much as possible. That is why the US is putting $2 trillion in and substantial proportion out of that is coming from QE or printing money,” he further mentioned.
“Jan-Dhan is the best conduit we have. There is not much other than sending cash to people,” he said.
In terms of the world economy, he said, “It depends very much on how quick the recovery is in the west because people are losing income, they are also not spending money, which means that in-principle if this recovery is fast then you will have a bunch of people who are reasonably optimistic, saying things have been okay and we have some savings at home and they will start spending it."
However, If the recovery is slower, then they are going to be more frightened by what has happened to them. So this expansionary spending is going to be critical. If it has a big demand boost and people are optimistic about the future then they will start spending money. They are not spending money right now, so they have some money at home but incomes are also falling, he said.
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