The government, in the upcoming Budget, should look at more demand-side measures such as putting more money in the hands of poorer people, rather than going for any more reduction in the corporate tax rate, Nobel Laureate Abhijit Banerjee said on Friday.
He also said farm loan waivers are inefficient measures of addressing distress, and the remedial measures should focus on the larger group of affected people than only focusing on those who have taken loans.
Banerjee was of the view that corporates are already sitting on cash, not investing because of lack of demand and that’s why the government needs to resolve the demand-side issues first.
“I would say that first no more cuts in corporate taxes … the corporate sector is sitting on cash, it is not investing. Why is it not investing? Because every sign of demand problem is there. Basically, if you talk to a lot of people in corporate sector, they say right now there is no market for them to sell. I think you have to get the demand side going. For that, you need to get money in the hands of people who will spend it now, people who need the money. Get the money in the hands of poorer people,” Banerjee said when asked about his expectations for the upcoming Budget for 2020-21.
He was speaking at an event here, along with Esther Duflo, his wife and co-winner of the Nobel Prize for Economics 2019.
When asked about the results of their studies on people’s spending when they are given cash, Banerjee said, “Our studies showed that if you give cash to people, they spend it. We don’t give cash to billionaires to check whether they spend it or not.”
Commenting on the issue of farm loan waivers, Banerjee said such instruments are unfair and inefficient. “We actually have a very underdeveloped machinery for providing support to people in distress … what we do instead (is) these instruments like farm loan waivers, which are unfair and really inefficient.”
Banerjee further said deficient monsoons impact many people and there is “need to focus on more efficient machinery so that all people can be compensated, not only those who take loans”.
On the ongoing protests over the Citizenship Amendment Act and the National Register of Citizens, Banerjee said there could be abuse of power if decisions are restricted in the hands of few, and gave an example of how an official will get to decide whether one is a citizen or a doubtful case.
“I don’t think I’m the specialist. What is my experience from field work is that when you have somebody with enormous amount of power, that (person) would decide whether or not you will be on this list or that list. He has a lot of power. And so if he is going to say, ‘look, I am not sure that you’re a proper citizen’. Forget about religion … many things could be worried about. I am saying just prima facie if I would be somebody living in a border district, I would be petrified by that thought. And just the fact that somebody is going to say ‘look I’m in charge of making this list, I could put doubtful next to your name or I could not and can even make Rs 10,000’. The government’s challenge there is very severe,” Banerjee said.
He added, “Power to take decisions that can have passive consequences for life need to be extremely careful in designing institutions to make those decisions. They should not be made by quick Acts of Parliament.”
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