India should include a stimulus package large enough to revive demand: Abhijit Banerjee
NEW DELHI: India should include a package large enough to revive demand, the winner said Tuesday, saying putting cash in people's hands would be the best way to boost the economy after the shutdown.
Banerjee, while talking to the leader of Congress Rahul Gandhi through videoconferencing, he suggested giving money to the lower 60% of the population to help revive demand.
He was discussing the economic impact of the COVID-19 pandemic with Gandhi as part of a series of dialogues broadcast on social media in Congress.
Banerjee said it was important for India to announce a stimulus package large enough to face the crisis along the lines of what the United States, Japan and Europe are doing.
We really haven't decided on a big enough stimulus package. We are still talking about 1% of GDP. The United States has gone for 10% of GDP, said the prominent economist.
We have done one thing that I think is prudent, which is to put a moratorium on debt payments. We could do more than that. We could even say that debt payments for this quarter will be canceled and will be serviced by the government, he said.
To Gandhi's question about whether some form of the NYAY scheme proposed by Congress or the direct transfer of cash to people was the need of the hour, Benerjee replied affirmatively saying that it should not be limited only to the poorest.
I would say that 60% of the population, we give them some money, in my opinion nothing bad will happen. If we give them money, some of them may not need it. Well, they will spend it. If they spend it would have a stimulating effect, he said.
Banerjee also suggested that the government should give temporary ration cards to people to deal with the problem of food distribution.
He said another concern looks to the future after COVID-19 and is a chain of bankruptcies.
Perhaps paying off big debt is the way to go, he suggested.
The other concern, said the prominent economist, is the deficit in demand.
Putting some cash in the hands of the population is the best way to boost the economy, he said.