Approximately 65000 crore will be required to help poor: Dr. Rajan.
TheNewsweb, New Delhi, May 2: In a much discussed video conferencing Interview, Congress leader Rahul Gandhi spoke with renowned economist and ex RBI Governer Raghuram Rajan. The Congress leader asked the widely respected ex banker a range of questions on Indian economy, lock down, COVID 19 and centralisation of power while on few occasions the latter also sought Rahul Gandhi’s views on the respective subject.
Asked about the issue of opening up the economy, Rajan said that a lot of work has to be done on this front. The Ex-Banker elaborated that preparedness is required for creating the structures as well as emergency action plan related to workplaces so that if fresh cases come, by isolating the places quickly, second and third lock down could be avoided. He told that next rounds of lock down would be devastating for the economy and it will also diminish the credibility.
Responding to a question over India’s limited resources in terms of testing, Rajan suggested that employing the ‘two’ mass testing could be a cleverer approach to deal with it. He explained that by combining 1000 samples, a testing can be done so as to know if any sign of virus is present and if the result shows positive, a second round of testing would be needed.
When the Congress leader ask him how much money would be needed to help the poor, Raghram Rajan said that approximately 65000 crore will be required for the purpose, which according to him, is not very much given India’s overall GDP is 200 lakhs crore. In response to a question on the benefit of Panchayati Raj, Dr. Rajan said that decentralisation is crucial for both local feedback and empowerment of people.
Read the below transcript of selected parts of the interview:
R. Gandi- There is quite a lot of questions in people’s mind about what’s going on and what is going to happen with this virus and in particular with our economy?
R. Rajan – Thanks for having me and thanks for opening this conversation. I think it is very important in these times to have as much information on these issues as one can get and for the public to be as informed as possible.
R. Gandi –How we should think about opening up the economy. Which of the part of economy you think is critical to be opened up and what should be the sequence of opening up?
R. Rajan – It is a great question because as we turn from trying to bend the curve from infections and preventing hospitals and medical facilities from being overwhelmed, we have to start thinking about restarting people’s livelihood. It is all too easy to have lock down forever but obviously that is unsustainable for the economy. There has to be a sequencing. First the places where you can maintain distancing and it’s not just distancing in the workplace. It’s also distancing to and fro from workplace, in transportation structure. Do people who have private mode of transportation: the cycles, the scooters or even cars or do they depend on public transport? And if it’s public transport, how do you maintain distancing in public transport. So there is lots of work that needs to be done, both on creating the structures and as well as ensuring at the workplace it is relatively safe as well as ensuring if there are accidents, there are fresh cases; how do you isolate quickly without having to go to a 2nd lock down or 3rd lock down. Those will be devastating if we have to go there.
R. Gandi – A lot of people say that if you get into a cyclical lockdown where you open and you are forced to shutdown then that is devastating for the economic activity because it would completely destroy trust, would you agree with that?
R. Rajan – I think that’s right because “take even a 2nd lockdown that means that you haven’t been completely successful in reopening”, and that raises question if you reopen again, will you go into a 3rd lockdown? So it does diminish credibility. That’s it, I don’t think we have to aim for a 100% sort of success with zero cases when we open up, that’s unachievable. What we have to do is manage the reopening so that when there are cases, we isolate them.
R. Gandhi– But the heart of that management, (you know, knowing which areas are having heavy infections, which areas are not at the heart of that process) of course is testing. There is a sense in India that the testing capability isn’t itself limited, but we are a big country and our ability to test like US or other European countries is comparatively limited. So how would you think about it with this low level of testing?
R. Rajan – It’s a good question, because take the US right now. It’s ramped up to about 150000 per day. But the consensus amongst experts, certainly the epidemiologist is that t really be confident about opening up, you have to triple that to 500000 test a day at least and some are talking of the numbers in the millions. Well, just multiply by four to get or four and half to get India’s population and you are talking about two million test a day if you wanted to get to the level of confidence that you have in US. And clearly we are no way near that. I think we are somewhere around 25000 to 30000 test per day. But we have to be cleverer about opening up which means perhaps “two” mass testing. Take, you know, a thousand samples and then check in a mass way whether there any sign of the virus in those samples and if you do find that then you go deeper into that particular sample and check who it might be. These are the ways of testing which reduce the burden on the testing structure and can allow us to try and vet much more, it’s in some sense less intensive but it is cleverer. We have to be cleverer because we simply can’t wait tillwe have that kind of facility.
R. Gandi – There is going to be the impact of the virus and then after sometime there gonna be the impact on the economy, a sort of blowback impact that is going to come, a real impact, after a couple of months from now. How do you, sort of, make the balance between fighting the virus right now and fighting the consequences of the virus three or four months down the line?
R. Rajan – I think there has to be a prioritisation because our capacities and our resources are limited, certainly our financial fiscal resources are more limited than the west. So what we need do is decide how do we keep this economy together so that when we open up it’s sort of able to walk off the sick bench and not, you know, be impaired at that point. So most immediately I think keep people well and alive. Food is extremely important and reach it to every place. Places of public distribution does not go. Amartya Sen, Abhijeet Banerjee and I have talked about temporary ration cards for example, for people who don’t have access. But have to treat this pandemic as a situationwhich is unprecedented. We have to break norms in order to tackle what is needed while at the same time keeping in mind that there is overall budgetary sort of limit. There are only so many resources we have.
R. Gandi – What do you think about the agricultural sector and migrant workers. How should we be thinking about their finances?
R. Rajan – Well, this is where I think the efforts we made on direct benefits transfer, sort of, needs to be realised at this point. All the ways we transfer to relatively poor people, we need to take a call on that. We have different ways of accessing through widow’s pension, MNREGA roles and we need to say, look these are people who don’t have a job right now, who don’t have a livelihood and for the next three or four months while this uncertainty is on, we are going to support them but in terms of the priority, keeping people alive and keeping them form having to go on the streets looking for work is probably useful at a time of lock down. So need to find ways of getting both money as well as food through PDS to as many people as we can.
R. Gandi – So Dr.Rajan, how much money will be needed to help Poor. (Smiling)
R. Rajan – Approximately 65000 crore and 65000 crore is not very much compared to our GDP, which is 200 lakh crores. So we can do it and if it is for the poor and if it is to save their life then it should be done.
R. Gandi – Right now, the country is in trouble, but after COVID, will India get any strategic benefit from this episode? Will there be any changes in the world that India can be benefited from and can take any advantage? How the world will be changed according to you?
R. Rajan – You know, thesekind of incidents rarely have positive effects for any country in general. But there are ways countries can take advantage of. What we can say is that there will have to be a rethinking of everything in global economy once we are out of this. If there is opportunity for India, it is in shaping the dialogue in being more of a leader in that dialogue because it is not one of the two big warring parties but is a big enough country to have its voice heard in the global economy. In this situation India can find opportunities for its industry for its supply chains but most importantly it can try and mould the dialogue towards one which has greater place for more countries in the global order, a multipolar global order rather than single or a bipolarglobal order.
R. Gandi – Don’t you think there is a crisis of centralisation, that there is too much centralisation of power taking place and the conversations are stopping. I think conversation would help a lot of these problems that you are talking about.
R. Rajan – I do believe that decentralisation is important both for bringing more local information to work something we talked about earlier but also about giving empowerment to the people. What you see across the world is a great sense of disempowerment, decisions are being made elsewhere andnot by me, I have a vote but that elects somebody in a far-off place, my local panchayat or state govt. has less power. They don’t feel they can alter anything and so they become prey to different set of force.
R.Rajan – I would ask you the same question, I mean do you see this whole Panchayati raj which Rajiv Gandhi brought back, what effect does that had, has that been beneficial?
R. Gandi – It had a huge effect but, I am sorry to say, it’s in retreat, so a lot of forward movement on Panchayati Raj that had taken place we are now moving back to a sort of bureaucratic BM based structure. And if you look at southern States they are doing a better job because they are actually more decentralized and the northern states are centralizing power and they are taking away power from the Panchayats, a sort of grass root organisations.
Courtesy: Aquib Khan