Speaking about the role RBI can play during the coronavirus pandemic, Raghuram Rajan said the need of the hour is to provide credit to ailing businesses.as coronavirus delivers a body blow to the already weak Indian economy, former RBI governor Raghuram Rajan tells what the central bank can do to soften the impact.
Raghuram Rajan spoke exclusively to India Today News Director Rahul Kanwal about his understanding of the economic situation in a post-coronavirus world and how India can deal with the global pandemic.
Speaking about the role RBI can play at the moment, Raghuram Rajan said the need of the hour is to provide credit to ailing businesses. However, the RBI is unable to rise to the occasion due to the existing lag in the Indian economy.
“We have a financial system that is impaired. I have always maintained that we need to clean it up so that it can function as necessary. The problem now is that the RBI can’t provide credit support to businesses,” he told India Today TV.
So what is the solution? “The government has to offer partial guarantees to make sure banks keep lending to small and medium enterprises as well as large firms. At the same time, we have to provide some incentives so that banks are willing to take the credit risk.”
He had another advice for the RBI — “At this point, the RBI should take a cue from central banks across the world who are contributing by easing liquidity. Liquidity should not be a constraint. But we need to think carefully as we have large NPAs,” he added.
Raghuram Rajan also advocated a temporary income transfer scheme to help the poor survive during the coronavirus pandemic. He, however, clarified that now is not the time to think about a universal basic income program.
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