Spending is the easiest way to revive the economy amid the COVID-19 crisis, Nobel laureate Abhijit Banerjee told Congress leader Rahul Gandhi, adding that a direct transfer to people to spend was a good way to ensure this.
The former Congress president was in conversation with Banerjee on May 5 about the economic fallout as a part of his series of deliberations with experts on economy and health.
Banerjee suggested giving money into the hands of the bottom 60 percent population to help revive demand.
To Gandhi's question as to whether some form of the Congress-proposed NYAY scheme or direct cash transfer to people was the need of the hour, Benerjee answered in the affirmative saying it should not be limited just to the poorest.
"I would say the bottom 60 percent of the population, we give them some money, nothing bad will happen in my view. If we gave them money, well some of them might not need it. Fine, they'll spend it. If they spend it, it would have a stimulus effect," he said.
Banerjee further said it was important for India to announce a large enough stimulus package to deal with the crisis on the lines of what the US, Japan and Europe are doing.
"We really haven't decided on a large enough stimulus package. We are still talking about 1 percent of GDP. The United States has gone for 10 percent of GDP," the noted economist said.
Banerjee said, "we have done one thing that I think is wise, which is to kind of put a moratorium on debt payments. We could do more than that. We could even say that the debt payments for this quarter will be cancelled and will be taken care of by the government," he said.
Banerjee also suggested that the government should hand out temporary ration cards to people to deal with the problem of food distribution.
He said another concern looking ahead post-COVID-19 and is a chain of bankruptcies.
"Maybe writing off a lot of debt is the way to go," he suggested.
On May 4, the Congress party tweeted a 1.44-minute clip from their conversation which aired in full the next day.
The first such dialogue was held last week when Gandhi discussed the coronavirus pandemic and its economic implications with former Reserve Bank of India (RBI) governor Raghuram Rajan.
During that dialogue, Rajan said that India should be "cleverer" in lifting the lockdown and open up its economy in a "measured way" soon to save jobs.
He also said that Rs 65,000 crore should be spent to support the poor hit hard by the crisis.
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