India’s Chief Economic Advisor (CEA) Krishnamurthy V Subramanian expects that the country will have a V-shaped recovery. People are “more pessimistic than they need to be,” he said.
Subramanian made the statement at a virtual conference by All India Management Association (AIMA) on May 13.
He pointed out that Spanish influenza had a higher kill rate, but the economic rebound was rapid after the situation came under control. Optimistic about India’s growth recovery, Subramanian said the stimulus package would address the supply-side impact with liquidity injection, News18 reported via IANS.
“Businesses do not have the revenue while they are bearing the fixed costs and their variable costs have not declined much. The liquidity issue may create solvency problems for firms," he added.
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Stating that Money could be targeted at sunrise rather than sunset sectors, he said, adding, "Creative destruction is required in market economies and the inefficient firms have to die and the workers have to be reallocated.”
He also likened the present stimulus package and government measures to the 1991 economic reforms, terming it “radical”, especially for labour (Gujarat, Uttar Pradesh and Madhya Pradesh), land (Karnataka), agriculture sector and liquidity.
He expects public sector banks (PSBs) to be more open to lending as they were reluctant before the pandemic and even during it, adding that banks were nationalised “to help in times like this.” He felt that the Centre’s 100 percent guarantee of MSME loans would encourage banks and even non-banking finance companies (NBFCs) to lend more.
“A measured dose of monetisation” would not spike inflation due to deflationary impact from COVID-19.
He was also optimistic about future announcements of the Rs 20 lakh crore package, suggesting that they would be “significantly reform-oriented.”
He also added that Atmanirbhar Bharat would mean tailoring products for those bottom of the pyramid and not just the top 30 percent of the population. The CEA also added that the Centre is trying to help the migrant workers by introducing a national ration card.
The CEA said the industry had to hire local workers even at higher costs and invest in the safety and skills of the migrant workers. He said the government was trying to help the migrant workers by introducing a national ration card.Follow our full COVID-19 coverage here