Govt should loosen purse string in short run to provide bigger funds to poor: Abhijit Banerjee

File image

Nobel prize winner Abhijit Banerjee on July 15 said that in the short run, the government should loosen its purse string to provide bigger funds to the poor as the recovery from the impact of the COVID-19 pandemic is going to be longer and more painful. "In the short run, I think the government's basic general thinking is use whatever instruments you have to give people some money. That's probably a good instinct. I think the amounts are wrong, it should be bigger, it's going to be a longer and more painful recovery and that will demand a more generous system and I think in the middle of this, redesigning systems is a bad idea," he said.

He added that whosoever needs a ration card should be provided without asking questions such as "are you a citizen, are you this, are you that, are you entitled" in the short run.

But in the medium run, he said 'One Nation-One Ration Card' based on a generous interpretation of who is entitled would be a good thing.

"In the short run, the government should loosen the purse strings but trying to invent new instruments is a bad idea," Banerjee said.

He also said that in the very short run, the government should not try to do much.

"Trust in the system is important at this point and keeping that in mind, it is very important that we do not get into the politics of who is entitled to what. That will further undermine trust in the system. This is the time when trust is extremely important," he noted.

He added that there is a need to re-think about the entire welfare system and in that context, take into account urbanisation of poverty and "how we find something commensurate for urban population".

Banerjee also said that although Universal Basic Income would not solve the problem of COVID-19 crisis directly, it is important to open channels to have a way to send money.

He also said MGNREGA is not designed for emergency response.