Rahul Gandhi and Abhijit Banerjee discussed the measures to revive economy (file photo, Courtesy: Sakshi Post)

Nobel laureate says India needs large enough stimulus package to revive economy

TNW, New Delhi, May 5: The Nobel Prize winning economist Abhijit Banerjee said that large fiscal stimulus is indispensable to help the poor and cater the impact of lock down on the economy. In an online interview with Congress leader Rahul Gandhi on Tuesday, Mr. Banerjee, a Ford Foundation International Professor of Economics at MIT also suggested to distribute the food through temporary ration card for next three months so that migrant workers can get sufficient foods.

Responding to a question Mr. Banerjee pointed out that linking of Public Distribution System to Aadhaar, which was conceptualised in UPA time and later adopted by the Modi government, has not achieved the desired objective of citizen getting ration anywhere in the country by just showing the Aadhaar card. Much of food issues of migrant workers would have been solved had such system in place.

Asked if cash transfer to poor is a solution the renowned expert said, “Absolutely. Whether it is to the poorest people, that is more debatable… 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. The only place where I’m more aggressive is that I would go beyond the poorest people.”

Responding to a question on opening up of the economy, Abhijit Banerjee suggested, “The sooner you come out of the lock down of course depends on the disease. You don’t want to take down 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.”

He said, even before lock down there was a demand issue, now the purchasing power of the masses has further diminished. So, the most appropriate way to boost the demand is to put the money into the hands of people.

However, when Rahul Gandhi stated that MSME and small enterprises do need some sort of help as these sectors carries bulk of the employment load, Banerjee seems to be more inclined towards handing out cash to a broad group of people, which, according to him, will boost the demand and revive the economy. “…It is not clear that targeting the MSME sector is the right channel. It is more about reviving demand. Giving money in the hands of everybody, so that they can buy in stores or they buy consumer goods,” he said.

Previously the economist had told the BBC that India needs to be much more generous in providing relief to the millions of people who have been direly hit by the ongoing lock down.

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