Nobel laureate and economist Abhijit Banerjee on Tuesday said the national lockdown has indeed created a havoc on the economic front and that the government is not clear how much it is willing to spend on a stimulus package as 1 per cent of GDP is not enough to lift the situation.
"A lot of us have been saying that we need a stimulus package. That’s what the US is doing, Japan is doing, Europe is doing. We really haven’t decided on a large enough stimulus package. We are still talking about 1% of GDP. United States has gone for 10% of GDP, " he said.
Banerjee in a virtual conversation with Rahul Gandhi, said the government did a right thing in putting a moratorium on debt payments and that it can do more than that by cancelling debt payments for this quarter altogether.
Rahul Gandhi (@RahulGandhi) May 5, 2020
According to the nobel laureate, spending is the easiest way to revive the economy as MSME sector will get back to its position which will have subsequent chain reaction. He suggested poor section of the seciety should be given money so that they spend which would create a stimulus effect.
On the demand challenge in the Indian economy, the Nobel laureate said, "Even before this happened, I have been saying that we have a demand problem. Now we are going to have a bigger demand problem. Because it is the usual problem. I have no money, I am not buying anything because my shop is closed. But then your shop is closed because I am not buying anything from you."
He said to contain the food problem in the country, government should hand out temporary ration cards with three months validity and extend it to three more, if necessary.
"In fact, we wrote an OpEd with Raghuram Rajan and Amartaya Sen, saying literally that handout temporary ration cards to anybody who wants one. In fact, put other ration cards in abeyance, just put temporary ration cards. Anybody who wants one, get a temporary ration card. Lasts for 3 months for now and maybe renewed for another 3 months if necessary, and honour that. Give everyone a ration card, anyone who walks in give them one. And use that as a basis for making transfers. I think we have enough stocks. I think we can keep going for a while," he said