Nobel laureate and economist Abhijit Banerjee has said that India should put in a large enough stimulus package to revive demand as putting cash in the hands of people is the best way to boost the economy after the lockdown.
In a video conference with Rahul Gandhi on Tuesday (May 5), Prof. Banerjee suggested giving money into the hands of the bottom 60 per cent population to help revive demand.
This was Gandhi’s second conversation as part of a series of dialogues on the economic impact of the COVID-19 pandemic broadcast on Congress’ social media handles.
Banerjee said India should draw inspiration from US, Japan and Europe and announce a large enough stimulus package to deal with the economic crisis.
“We really haven’t decided on a large enough stimulus package. We are still talking about 1 per cent of GDP. The United States has gone for 10 per cent of GDP,” the noted economist 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.
To Gandhi’s question as to whether some form of the Congress-proposed NYAY (Nyuntam Aay Yojana) scheme or direct cash transfer to people was the need of the hour, Prof. Banerjee answered in the affirmative saying it should not be limited just to the poorest.
“I would say bottom 60 per cent 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.
Prof. 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.
(With inputs from agencies)