'The government that continues to spend is better than the government that gives liquidity'
MUMBAI: The government needs to take steps to generate demand and focus on the national investment climate to repair the economy, according to economists Pronab Sen and Gangopadhyay.
“In the last seven weeks of national blockade and about three weeks from various state governments, my total damage estimate is Rs 18 lakh crore. That is Rs 18 lakh crore of income has not happened. Things get much worse if at least part of that is not resolved by public intervention and the multiplier works and the total loss of income in the country will increase by Rs 35 lakh crore. Therefore, early intervention is necessary, the senator said.
He said that while the intervention of Rs 20 lakh crore was great, a lot depends on how the amount was measured. “If you're talking about Rs 20 lakh going into rehab and building capacity, it's great. But much of it is not. The actual point is also the period in which the amount is to be spent. Rs 20 lakh crore in one year is one thing and Rs 20 lakh crore in three years is a different ball game, the senator said.
Sen, the former chief statistician is currently the Country Director for the India Program and on the Vedica Scholars for Women and Policy faculty. He and Gangopahyay spoke about containing the economic consequences of the Covid-19 crisis at a global online conference hosted by Bennett University, which was part of the Covid-19 Bhi series, sponsored by Darwin Industries. Bennett University is an initiative of the Times Group.
Based on Gangopadhyay's return, demand was challenging as companies would first consider unloading their existing inventory before beginning production and hiring labor. Right now, none of the measures are addressing the demand side, they are all addressing the supply side, which is all good, but the engine can only be demand, he said, adding that the government that is going through a wave of spending is better than government giving liquidity.
Gangopadhyay is currently the Director of Research and Founding Dean of the Indian School of Public Policy. He said that there was a need to change the approach in policy formulation.
Instead of making policies for producers, for MSMEs or foreign investment, we have to start making policies for Indian citizens, he said.
He added that due to a lack of focus on people, policymakers missed that 23% of our strength is migrant. It does not seem to register with anyone that we have 120 million migrant workers and nobody thought about what their situation would be when the closure was announced.