India needs a large stimulus package; India should take cue from the US and pump more money into the hands of people to revive demand : Dr Abhijit Banerjee

Rahul Gandhi in conversation with Nobel Laureate, Prof. Abhijit Banerjee on the economic impact of the COVID crisis – Excerpts :

  • Rahul Gandhi :
    Lot of these people get their jobs from small and medium businesses, who are going to have cash flow problem. And a lot of those businesses are going to go bankrupt because of the shock.So there is also a link between the economic damage that is going to come to those businesses and the ability of these people to maintain a job.

    Dr Abhijit Banerjee :
    That’s why a lot of us have been saying we need a stimulus package. That’s what US, Japan, Europe are doing. We haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. USA has gone for 10% of GDP. India should take cue from the US and pump more money into the hands of people to revive demand.

    We could even say debt payments for this quarter will be cancelled and taken care of by govt. It’s not just a matter of rescheduling it, just permanently cancelling it. We could do that
  • Rahul Gandhi :
    The sooner you are able to come out of a total lockdown, the better it is. You need a strategy that begins to start a part of the economy quickly. Otherwise the money is useless

    Dr Abhijit Banerjee :
    You don’t want to end the lockdown when a lot of people are getting sick. So you are absolutely right. We have to kind of be aware of the time path of the disease.
  • Rahul Gandhi :
    What else do you think should be part of the package that the government is thinking of. We have spoken about the Small and medium industries, migrant labour, the food issue. Any other thing that you think should be on that list.

    Dr. Abhijit Banerjee :
    The last piece of this is, to get cash to people who really need some machinery. We can’t really get cash to people. People who have Jan Dhan accounts can get money but many people don’t, especially migrants may not have access.

    We should give money to State Govts to try out their own schemes, reach people who are excluded using NGOS. Some money will be stolen. But if we say that we don’t want to do anything that could go possibly wrong, then we’ll make sure it goes wrong.
  • Rahul Gandhi :
    Are there any experiences in other countries that you found interesting?

    Abhijit Banerjee :
    Indonesia has decided that it is going to give out cash transfers entirely through a community decision making process. It doesn’t do any worse than centralised targeting. You don’t get captured by special interest or anything.

    People make judgments about what is appropriate in a locally nuanced way. It’s an experience you could learn from. In an emergency that is a good policy because community has some information that wouldn’t possibly centralise.

Source & Pic Credit : @INCIndia

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