India needs a bigger stimulus package and money should be put in the hands of people to revive demand, Nobel Laureate Abhijit Banerjee said in a video interaction with Rahul Gandhi on the economic fallout of the coronavirus crisis. This is the second instalment of the Congress leader’s discussion series that began with renowned economist Raghuram Rajan last week.
Abhijit Banerjee said in the interaction that cash transfers must go beyond the poorest of the poor.
Mr Gandhi noted that many small and medium businesses hit by the COVID-19 lockdown could “go bankrupt” because of the shock. This, he said, would cost jobs.
“That’s the reason a lot of us have been saying that we need a stimulus package,” the renowned economist agreed.
“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.”
India should take a cue from the US by pumping in more money in the hands of the people to revive demand, Dr Banerjee said, while suggesting that one should try to be optimistic about overall economic revival in India post-lockdown.
“Giving money in the hands of everybody, so that they can buy in stores or they buy consumer goods.”
As Mr Gandhi suggested he was talking about some form of direct cash transfer to people, Dr Banerjee said the beneficiaries must be among the poorest, but it was important to decide what criteria to target.
“I would say bottom 60% of the population, we give them some money, nothing bad will happen in my view,” said the economist.
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